Advertising Model Research Articles

Optimal Investment in Age-Structured Goodwill

Segmentation is a core strategy in modern marketing, and age-specific segmentation based on the age of the consumers is very common in practice. Age-specific segmentation enables the change of the segments composition during time and can be studied only by means of dynamic advertising models. Here we assume that a firm wants to optimally promote and sell a single product in an age-segmented market and we model the awareness of this product using an infinite dimensional Nerlove-Arrow goodwill as a state variable. Assuming an infinite time horizon, we use some dynamic programming techniques in infinite dimension to characterize both the optimal advertising effort and the optimal goodwill path in the long run. An interesting feature of the optimal advertising effort is an anticipation effect with respect to the segments considered in the target market, due to time evolution of the segmentation. We analyze this effect in two different scenarios: in the first, the decision makers can choose the advertising flow directed to different age segments at different times, while in the second they can only decide the activation level of an advertising medium with a given age-spectrum.

An Analysis of Nudity in Chinese Magazine Advertising: Examining Gender, Racial and Brand Differences

This study gives a most recent view of nudity in Chinese magazine advertising. Focusing on gender, racial and brand differences, the authors content analyzed 2,058 models in 19 Chinese consumer magazines from a stratified random sample of four months in 2009. Results showed that female models were more likely to be shown in different levels of nudity than male models, and Western models were more likely to be shown in different levels of nudity than Chinese models, as predicted. However, regarding brand origin, although Western advertisers portrayed models in higher levels of nudity, Western and Chinese advertisers did not differ in their portrayals when models were examined separately by brand origin. Our study suggests that sexism in advertising is a cross-cultural phenomenon, and Western advertising models are the trend setters of sexual images in Chinese magazine advertising. Chinese advertising is not only a “melting pot” of cultural values, but also a “melting pot” of advertising practices.

Specialized advertising media and product market competition

This paper studies the strategic relationship between a specialized communication medium and a product market. To that end, we formulate a model of informative advertising and price competition where the advertising fee is endogenously determined by the interaction between two firms producing a horizontally-differentiated good and a communication platform. We find that (i) when the subscription to the medium is free, the platform asks for high prices for its advertising services, which allows firms to raise their prices to the level where the marginal potential consumer achieves zero utility and (ii) a positive subscription fee generates cross-side externalities between the firms and subscribers, which can increase or decrease the equilibrium advertising fee. In particular, under a positive advertising externality, the platform tends to charge low advertising fees, thus triggering strong price competition between firms. We also show that less product differentiation or a lower consumer valuation of the goods can increase firms’ profits, so a strategic connection between the product and the media markets can substantially affect the functioning of a differentiated product market.

A novel recommendation model of location-based advertising: Context-Aware Collaborative Filtering using GA approach

Recommender systems are the efficient and most used tools that prevail over the information overload problem, provide users with the most appropriate content by considering their personal preferences (mostly, ratings). In addition to these preferences, taking into account the interaction context of users will improve the relevancy of the recommendation process. However, only a few prior studies have tried to adopt context-awareness to the recommendation model. Although a number of studies have developed recommendation models using collaborative filtering (CF), few of them have tried to adopt both CF and other artificial intelligence techniques, such as genetic algorithm (GA), as a tool to improve recommendation results.In this paper, we propose a new recommendation model, which we termed Context-Aware Collaborative Filtering using genetic algorithm (CACF-GA), for location-based advertising (LBA) based on both user’s preferences and interaction’s context. We first defined discrete contexts, and then applied the concept of “context similarity” to conventional CF to create the context-aware recommendation model. The context similarity between two contexts is designed to be optimized using GA. We collect real-world data from mobile users, build a LBA recommendation model using CACF-GA, and then perform an empirical test to validate the usefulness of CACF-GA. Experiments show our proposed model provides the most accurate prediction results compared to comparative ones.

New Media Business Models in Social and Web Media

The author argues that the economic shakeout of media firms and economic downturn of media markets is dominantly evident in traditional media industries whereas in new media the profit has been relatively stable. He argues that a real media crisis began a decade before the global recession that started in September 2008 and resulted from the emergence and subsequent convergence of digital media, falling costs of computing and online (internet-web) distribution, exponential growth of internet and broadband adoption and media market deregulation. The author argues that in order to attain sustainable competitive advantage, media executives and companies are required to strategically adopt, implement and utilize new consumer strategies integrating micropayments, new advertising models, innovative distribution methods, new audience concepts and high quality social and web media content production.

A Study on the Influence of Attributes of Celebrity Advertising Models on Advertising Attitude, Corporation Reputation and Reliability: Focusing on TOUS les JOURS and Baskin Robbins Christmas Cake Advertisements

A Study on the Influence of Attributes of Celebrity Advertising Models on Advertising Attitude, Corporation Reputation and Reliability: Focusing on TOUS les JOURS and Baskin Robbins Christmas Cake Advertisements

A Study on the Influence of Attributes of Celebrity Advertising Models on Advertising Attitude, Corporation Reputation and Reliability: Focusing on TOUS les JOURS and Baskin Robbins Christmas Cake Advertisements

A Study on the Influence of Attributes of Celebrity Advertising Models on Advertising Attitude, Corporation Reputation and Reliability: Focusing on TOUS les JOURS and Baskin Robbins Christmas Cake Advertisements

Management Insights

Management Insights

Cyclical Bid Adjustments in Search-Engine Advertising

Keyword advertising, or sponsored search, is one of the most successful advertising models on the Internet. One distinctive feature of keyword auctions is that they enable advertisers to adjust their bids and rankings dynamically, and the payoffs are realized in real time. We capture this unique feature with a dynamic model and identify an equilibrium bidding strategy. We find that under certain conditions, advertisers may engage in cyclical bid adjustments, and equilibrium bidding prices may follow a cyclical pattern: price-escalating phases interrupted by price-collapsing phases, similar to an “Edgeworth cycle” in the context of dynamic price competitions. Such cyclical bidding patterns can take place in both first- and second-price auctions. We obtain two data sets containing detailed bidding records of all advertisers for a sample of keywords in two leading search engines. Our empirical framework, based on a Markov switching regression model, suggests the existence of such cyclical bidding strategies. The cyclical bid-updating behavior we find cannot be easily explained with static models. This paper emphasizes the importance of adopting a dynamic perspective in studying equilibrium outcomes of keyword auctions. This paper was accepted by Pradeep Chintagunta and Preyas Desai, special issue editors. This paper was accepted by Pradeep Chintagunta and Preyas Desai, special issue editors.

On a cooperative advertising model for a supply chain with one manufacturer and one retailer

Huang and Li (2001), Huang et al. (2002), Li et al. (2002), Xie and Ai (2006) and Yue et al. (2006) recently studied a game-theoretic model for cooperative advertising in a supply chain consisting of one manufacturer and one retailer. However, the sales-volume (demand) function considered in this model can become negative for some values of the decision variables, and in fact, this does happen for the proposed Stackelberg and Nash equilibrium solutions. Yue et al. (2006) acknowledge the negativity problem and suggest two constraints to fix it; however, they do not incorporate these constraints into their mathematical analysis. In this paper, we show that the results obtained by analyzing the advertising model under the constraints suggested by Yue et al. can differ significantly from those obtained in the previous papers.

Optimal Advertising When Envisioning a Product-Harm Crisis

How should forward-looking managers plan advertising if they envision a product-harm crisis in the future? To address this question, we propose a dynamic model of brand advertising in which, at each instant, a non-zero probability exists for the occurrence of a crisis event, which damages the brand’s baseline sales when the crisis occurs. Because managers don’t know when the crisis will occur, its random time of occurrence induces a stochastic control problem, which we solve analytically. More importantly, we gain an insight that the envisioning of possible crises alters managers’ rate of time preference: anticipation enhances impatience. Building on this insight, we then derive optimal feedback advertising strategies to discover the effects of crisis likelihood and damage rate. We prove that the optimal pre-crisis advertising decreases as the crisis likelihood (or the damage rate) increases. In addition, we develop continuous-time estimation method to estimate sales dynamics and feedback strategies simultaneously using discrete-time data. Applying it to market data from the Ford Explorer’s rollover recall, we furnish evidence to support the proposed model. Further extending the empirical literature, we detect compensatory effects in parametric shift: ad effectiveness increases, but carryover effect decreases (or vice versa). We also characterize the crisis occurrence distribution that shows Ford Explorer should anticipate a crisis in 2.1 years and within 6.3 years at the 95% confidence level. Finally, we find a remarkable correspondence between the observed and optimal advertising decisions.

Optimal Advertising When Envisioning a Product-Harm Crisis

How should forward-looking managers plan advertising if they envision a product-harm crisis in the future? To address this question, we propose a dynamic model of brand advertising in which, at each instant, a nonzero probability exists for the occurrence of a crisis event that damages the brand's baseline sales and may enhance or erode marketing effectiveness when the crisis occurs. Because managers do not know when the crisis will occur, its random time of occurrence induces a stochastic control problem, which we solve analytically in closed form. More importantly, the envisioning of a possible crisis alters managers' rate of time preference: anticipation enhances impatience. That is, forward-looking managers discount the present—even when the crisis has not occurred—more than they would in the absence of crisis. Building on this insight, we then derive the optimal feedback advertising strategies and assess the effects of crisis likelihood and damage rate. We discover the crossover interaction: the optimal precrisis advertising decreases, but the postcrisis advertising increases as the crisis likelihood (or damage rate) increases. In addition, we develop a new continuous-time estimation method to simultaneously estimate sales dynamics and feedback strategies using discrete-time data. Applying the method to market data from the Ford Explorer's rollover recall, we furnish evidence to support the proposed model. We detect compensatory effects in parametric shift: ad effectiveness increases, but carryover effect decreases (or vice versa). We also characterize the crisis occurrence distribution that shows that Ford Explorer should anticipate a crisis in 2.1 years and within 6.3 years at the 95% confidence level. Finally, we find a remarkable correspondence between the observed and optimal advertising decisions.

Coordination of cooperative advertising models in a one-manufacturer two-retailer supply chain system

This paper considers cooperative advertising issues of a monopolistic manufacturer with competing duopolistic retailers. Four possible game structures (or power configurations), i.e., Stackelberg–Cournot, Stackelberg–Collusion, Nash–Cournot and Nash–Collusion, are discussed. Under each of four game structures, we develop a decision model for the three partners to design the optimal cooperative advertising policies. Through a comparison among the four models, we reveal how cooperative advertising policies and profits of all participants are affected by various competitive behaviors, and then determine whether the partners have any incentives to transit to a different structure. Also presented in the paper are a centralized decision model and a proposed cost-sharing contract, which is able to achieve perfect coordination of the considered channel, where the utility of risk preference is used to determine the fraction of local advertising costs shared by the manufacturer.

Persuasive and Informative Advertising: A Classroom Experiment

The authors outline a pair of classroom activities designed to provide an intuitive foundation to the theoretical introduction of advertising in monopoly markets. The roles of both informative and persuasive advertising are covered. Each student acts as a monopolist and chooses the number of (costly) advertisements and the price. The experiments are intended for intermediate microeconomics or industrial organization courses, but might be used in any course that covers advertising models.

A model of repeat advertising

Advertising conveys information not only about product characteristics but also about the number of consumers who know about the product. More advertising may shift expectations towards a larger consumer base, increasing buyers' valuation when there are consumption externalities.

How do consumers react to physically larger models? Effects of model body size, weight control beliefs and product type on evaluations and body perceptions

The purpose of this article is to examine how a consumer's weight control beliefs (WCB), a female advertising model's body size (slim or large) and product type influence consumer evaluations and consumer body perceptions. The study uses an experiment of 371 consumers. The design of the experiment was a 2 (weight control belief: internal, external) X 2 (model size: larger sized, slim) X 2 (product type: weight controlling, non-weight controlling) between-participants factorial design. Results reveal two key contributions. First, larger sized models result in consumers feeling less pressure from society to be thin, viewing their actual shape as slimmer relative to viewing a slim model and wanting a thinner ideal body shape. Slim models result in the opposite effects. Second this research reveals a boundary condition for the extent to which endorser–product congruency theory can be generalized to endorsers of a larger body size. Results indicate that consumer WCB may be a useful variable to consider when marketers consider the use of larger models in advertising.

Gender Stereotypes Depicted by Western and Korean Advertising Models in Korean Adolescent Girls’ Magazines

Using content analysis based on Goffman’s (1979) typology, the authors examined gender role stereotypes in Korean fashion magazines targeting adolescent girls. Korean women were more stereotypically portrayed than any other group as smiling, pouting, and with a childlike or cute expression. On the other hand, Western women were more stereotypically portrayed than any other group in the categories of licensed withdrawal and body display. In some categories, male models were more female-stereotypically portrayed than female models of a particular race. Implications of the findings, future research suggestions, and limitations of the current study are discussed.

An Online Advertising Model: Comparing China and the U.S.

An Online Advertising Model: Comparing China and the U.S.

Product Variety, Informative Advertising, and Price Competition

In many product categories, consumer tastes are diverse, and firms use finely targeted advertising to inform consumers about their products. This article proposes a model of informative advertising that allows for diverse consumer tastes and multiple competing firms. Using this framework, the authors analyze how diversity in consumers’ tastes, informative advertising, and improvements in advertising technology may influence prices. First, informative advertising can lead to lower prices if consumer valuations are high. However, if consumer valuations are low, informative advertising can lead to higher prices. Second, when consumer valuations are high, price increases with greater diversity in tastes, though this result reverses if consumer valuations are low. Third, improvements in advertising technology lead to higher levels of advertising when consumer valuation is high, but the opposite effect can occur when consumer valuation is low. The authors relate these theoretical findings to previous empirical literature on advertising.

Increasing Dominance - The Role of Advertising, Pricing and Product Design

Despite the empirical relevance of advertising strategies in concentrated markets, the economics literature is largely silent on the effect of persuasive advertising strategies on pricing, market structure and increasing (or decreasing) dominance. In a simple model of persuasive advertising and pricing with differentiated goods, we analyze the interdependencies between ex-ante asymmetries in consumer appeal, advertising and prices. Products with larger initial appeal to consumers will be advertised more heavily but priced at a higher level - that is, advertising and price discounts are strategic substitutes for products with asymmetric initial appeal. We find that the escalating effect of advertising dominates the moderating effect of pricing so that post-competition market shares are more asymmetric than pre-competition differences in consumer appeal. We further find that collusive advertising (but competitive pricing) generates the same market outcomes, and that network effects lead to even more extreme market outcomes, both directly and via the effect on advertising.