Information content of advertising: empirical evidence from the OTC analgesic industry

Anderson, Simon and Ciliberto, Federico and Liaukonyte, Jura (2012): Information content of advertising: empirical evidence from the OTC analgesic industry.

Abstract

We empirically study the information-persuasion trade-off in advertising using data on the information content of advertisements, which we measure with the number of information cues in ads. We propose a simple theoretical framework to motivate an ordered probit model of information content. We find that stronger vertical differentiation is positively associated with the delivery of more product information in a brand’s advertisements: brands with higher levels of quality include more information cues. Next, comparative advertisements contain significantly more product information than self-promotional advertisements. Finally, brands with higher market shares and brands competing against strong generic substitutes have less information content.

• Item Type: MPRA Paper
• Language: English
• Keywords: Information Content, Advertising, Information-persuasion tradeoff, Content analysis, Ordered probit
• Subjects: L - Industrial Organization > L6 - Industry Studies: Manufacturing > L65 - Chemicals ; Rubber ; Drugs ; Biotechnology; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M37 - Advertising

References

Abernethy, A. M., G.R. Franke. 1996. The Information Content of Advertising: A Meta-Analysis. Journal of Advertising. 25 (2) 1-17.

Ackerberg, Daniel A. 2001. Empirically Distinguishing Informative and Prestige Effects of Advertising. RAND Journal of Economics, 32(2), 316-333.

Ackerberg, Daniel A. 2003. Advertising, learning, and consumer choice in experience good markets: an empirical examination. International Economic Review, 44(3), 1007-1040.

Anderson, S.P., F. Ciliberto, J. Liaukonyte, R. Renault. 2012. Push-Me, Pull-You:Comparative Advertising in OTC Analgesics Industry. Working paper, University of Virginia.

Anderson, S.P., R. Renault. 2006. Advertising Content. American Economic Review. 96(1) 93-113.

Anderson, S.P., R. Renault. 2009. Comparative Advertising: Disclosing Horizontal Match Information. RAND Journal of Industrial Economics. 40(3) 558-81.

Bertrand, M., D. Karlan, S. Mullainathan, E. Shafir, J. Zinman. 2010. What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment. Quarterly Journal of Economics. 125(1) 263-305.

Blundell, R., J.L. Powell. 2003. Endogeneity in Nonparametric and Semiparametric Regression Models. M. Dewatripont, L.P. Hansen, S.J.Turnovsky, eds. Advances in Economics and Econometrics, Theory and Applications. Eighth World Congress, Volume II. Cambridge University Press: Cambridge, UK.

Bresnahan, Timothy F. 1987. Competition and Collusion in the American Automobile Market: The 1955 Price War. Journal of Industrial Economics, 35(4), 457-482.

Cacioppo, J.T., R.E. Petty. 1985. Central and Peripheral Routes to Persuasion: The Role of Message Repetition. A.A. Mitchell, L.F. Alwitt, eds. Psychological Processes and Advertising Effects. Lawrence Erlbaum Associates , Hillsdale, NJ, 91-112.

Chervany, N., G. Dickson. 1974. An experimental evaluation of information overload in a production environment. Management Science. 20(10) 1335–1344.

Chintagunta, P.K. 2001. Endogeneity and Heterogeneity in a Probit Demand Model: Estimation Using Aggregate Data. Marketing Science. 20(4) 442-456.

Chou, L., G.R. Franke, G.B. Wilcox. 1987. The Information Content of Comparative Magazine Ads: A Longitudinal Analysis. Journalism Quarterly, 64 (1) 119-24.

Christou, C., N. Vettas. 2008. Informative advertising and product differentiation. International Journal of Industrial Organization. 26(1) 92-112.

Dekimpe, M.G., D.M. Hanssens. 1995. The Persistence of Marketing Effects on Sales. Marketing Science. 14(1) 1-21.

Erdem, K., M.P. Keane, B. Sun. 2008. The Impact of Advertising on Consumer Price Sensitivity in Experience Goods Markets. Quantitative Marketing and Economics. 6(2) 139-176.

Goldfarb, A., C.E. Tucker. 2011. Privacy Regulation and Online Advertising. Management Science. Vol. 57(1) 57–71.

Grabowski, Henry G. and John M. Vernon. 1992. Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act. Journal of Law and Economics, 35(2), 331-350.

Greene, W.H. 1997. Econometric Analysis, 3rd ed. Prentice Hall, London.

Guo, L.,Y. Zhao. 2009. Voluntary Quality Disclosure and Market Interaction. Marketing Science, 28(3) 488-501.

Harmon, R., N. Razzouk, B.L. Stern. 1983. The Information Content of Comparative Magazine Advertisements. Journal of Advertising. 12(4) 10-19.

Hong, J.W., A. Muderrisoglu, G.M. Zinkhan. 1987. Cultural Differences and Advertising Expression: A Comparative Content Analysis of Japanese and U.S. Magazine Advertising. Journal of Advertising. 16(1) 55-68.

Ippolito, P.M., J.K. Pappalardo. 2002. Advertising Nutrition and Health: Evidence from Food Advertising 1977-1997. Washington, DC: Bureau of Economics Staff Report, Federal Trade Commission.

Jacoby, J. 1977. Information load and decision quality: Some contested issues. Journal of Marketing Research. 14(4) 569–573.

Lancaster, K. 1971. Consumer Demand: A New Approach. Columbia University Press, New York & London.

Liaukonyte, J. 2010. Is Comparative Advertising an Active Ingredient in the Market for Pain Relief?”. Working Paper, School of Applied Economics and Management, Cornell University.

MacInnis, D.J., B.J. Jaworski. 1989. Information Processing from Advertisements: Toward an Integrative Framework. Journal of Marketing. 53(4) 1-23.

MacInnis, D.J., C. Moorman, B.J. Jaworski. 1991. Enhancing and Measuring Consumers’ Motivation, Opportunity, and Ability to Process Brand Information from Ads. Journal of Marketing. 55(4) 32-54.

Madden, C.S., M.J. Caballero, S. Matsukubo. 1986. Analysis of Information Content in U.S. and Japanese Magazine Advertising. Journal of Advertising. 15(3) 38-45.

Maheswaran, D., J. Meyers-Levy. 1990. The Influence of Message Framing and Issue Involvement. Journal of Marketing Research. 27(3) 361-367.

Nevo, A. 2001. Measuring Market Power in the Ready-to-Eat Cereal Industry. Econometrica. 69(2) 307-342.

Pappalardo, J.K., D.J. Ringold. 2000. Regulating Commercial Speech in a Dynamic Environment: Forty Years of Margarine and Oil Advertising Before the NLEA. Journal of Public Policy & Marketing. 19(1) 74-92.

Pieters,R., L. Warlop, M. Wedel. 2002. Breaking Through the Clutter: Benefits of Advertisement Originality and Familiarity for Brand Attention and Memory.Management Science. 48(6) 765–781.

Peters, R., M. Wedel, J. Zhang. 2007. Optimal Feature Advertising Design Under Competitive Clutter. Management Science. 53(11) 1815–1828.

Resnik, A.J., B.L. Stern. 1977. An Analysis of Information Content in Television Advertising. Journal of Marketing. 41(1) 50-53.

Rivers, D., Q.H. Vuong. 1988. Limited Information Estimators and Exogeneity Tests for Simultaneous Probit Models. Journal of Econometrics. 39(3) 347-366.

Simon, C.J., Sullivan, M.J. 1993. The measurement and determinants of Brand Equity: A Financial Approach. Marketing Science. 12(1) 28-52.

Smith, R.J., R.W. Blundell. 1986. An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply. Econometrica. 54(3) 679-685.

Soberman, D.A. 2002. Research Note: Additional Learning and Implications on the Role of Informative Advertising. Management Science. 50(12) 1744–1750.

Stern, B.L., D.M. Krugman, A.J. Resnik. 1981. Magazine Advertising: An Analysis of Its Information Content. Journal of Advertising Research. 21(2) 39-44.

Stern, B.L., A.J. Resnik. 1991. Information Content in Television Advertising: A Replication and Extension. Journal of Advertising Research. 31(3) 36-46.

Sun, M. 2011. Disclosing Multiple Product Attributes. Journal of Economics & Management Strategy. 20(1) 195-224.

Vakratsas, D. and T. Ambler. 1999. How Advertising Works: What Do We Really Know? Journal of Marketing. 63(1) 26-43.

Woolridge, J. 2001. Econometric Analysis of Cross Section and Panel Data. The MIT Press, Cambridge, MA.