Effects of Advertising on Advance Selling and Online Search
Date of Award
Doctor of Philosophy (PhD)
Amiya K. Basu
Marketing, Business Administration
Business Administration, Management, and Operations | Marketing
Advertising has been one of the most important marketing variables for both practices and academic literature, and it has been generally known to raise the firm's market share (Ataman, van Heerde, and Mela 2010). However, under the contemporary market environment, advertising's impact may be more complicated. For example, in advance selling practices, advertising today may increase today's sales, but it may or may not be profitable in the long run. In addition, traditional advertising may influence online consumer behavior.
Chapter one of the dissertation studies optimal intertemporal advertising and pricing decision of an advance selling firm. This chapter proposes a structural empirical framework to control for advertising and pricing endogeneity in the presence of a large product line under capacity constraints. The approach uses the shadow prices from the firm's constrained maximization problem to link strategic decisions over time, a middle ground between existing dynamic and static choice models. The framework is applied to data from a major cruise line using a nested logit to represent heterogeneous consumer demand. The results show that demand cannibalization is the primary driver of dynamic pricing and that advertising helps to build category demand. A counterfactual experiment suggests that dynamic pricing accounts for 18% of the seller's variable profit.
Chapter two studies the relationship between traditional advertising and consumers' online search behavior. Despite a 20-year trend toward integrated marketing communications, advertisers almost never coordinate television and search advertising campaigns. This chapter investigates the simplest possible explanation for this phenomenon, the possibility that television advertising does not influence online search. It finds a statistically significant relationship between television advertising for financial services brands and consumers' tendency to search branded keywords (e.g. "Fidelity") rather than generic category-related keywords (e.g. "stocks"). The effect is largest for young brands during standard business hours with an elasticity, .07, comparable to extant measurements of advertising's impact on sales. However, television advertising is not related to category search incidence. These findings confirm the external validity of previous experimental findings and suggest that practitioners should account for these effects when planning, executing, and evaluating both television and search advertising campaigns.
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Joo, Mingyu, "Effects of Advertising on Advance Selling and Online Search" (2012). Marketing - Dissertations. Paper 1.