Essays on seduelized and comparative advertising strategies: a search for the best advertising decision

Abstract

Different formats of competitive advertising strategies interplay in present day markets. While some advertisements compare competing brands, some others are sequelized on earlier advertisements, either in an attempt to spoof a competitorHs claim, or as retaliation to a preceding comparative advertisement. Previous research demonstrates comparative advertising (CA) as a superior strategy than the traditional noncomparative format. However, summarized below are the significant limitations of existing research on CA: 1) There is little theory on performance of CA vis-H-vis retaliation from a compared-to brand. This dimension of competitors reaction(s), as argued in literature, is necessary for the comprehensive evaluation of any competitive strategy. 2) In spite of frequent instances of sequelized comparative advertisements, existing research on the subject is limited to assessments of nonsequel formats only. 3) Finally, while empirical studies pertaining to effectiveness of CA and non-CA are numerous in marketing literature, a theoretical basis for analyzing the dynamics of the same remains to be explored. In this research we incorporate the possibility of retaliation to comparative claims(s) from a compared-to brand and demonstrate that the positive effects of CA are significantly diluted. We extend this finding with an evaluation of contemporary advertising formats, e.g. comparative advertisements, sequelized advertisements, and sequelized comparative advertisements. Finally, we construct a theoretical model for analyzing the strategic implications of comparative versus noncomparative advertising strategies on involved brands payoffs. We begin this research with an exploratory exercise focusing on in-depth interviews of industry experts in advertising. This is based on an underlined aim of inferring the crucial differentiating characteristics of sequelized and comparative advertising strategies. The remainder of the work is organized as two independent essays: 1) An experimental analysis of impact of different advertising formats on consumers, and 2) Construction of a theoretical market response model for advertising format followed by a game-theoretic analysis of the profit maximizing advertising decision. Following is a brief discussion on the purpose and structure of the aforesaid essays. The first essay focuses on an empirical exercise to infer the differentiating impact of sequelized and comparative advertising formats on consumers. The method chosen is experimentation, where the control group is exposed to a typical nonsequelized noncomparative advertisement, ceteris paribus. We choose the difference in a brands weight in consumers evoked set, due to exposure to different formats, as the index of performance in the aforesaid evaluation. We provide normative insights on implementing the different strategies by incorporating the aspect of communication focus: attribute or benefit based versus theme or story based advertisement messages. This is based on inferences in existing literature that effectiveness of CA is moderated by the communication focus assumed in the message; e.g. direct versus indirect message. In our second essay, we address a critical question: What is the best advertising strategy in terms of the advertising format and ensuing optimal advertising expenditure in a competitive setting? We construct a noncooperative game-theoretic model to represent the impact of comparative versus noncomparative advertising strategies on involved brands payoffs. We assume a one-period game amongst brands, whose objectives are to maximize individual 4 profits. The decision variable - advertising decision, is posed as a two pronged task: optimal advertising expenditure nested on the decision on best advertisement format. We consider a duopoly, with constant market size, and consumer heterogeneity in terms of attitude towards comparative advertisements. The model is simple, yet amenable to additional consumer heterogeneity, due to brand loyalty, as well as asymmetry in terms of market shares held. It is also robust as it conforms to inferences in empirical literature on CA. Another advantage of this phase of research is that it provides a comprehensive analysis of profit maximizing strategies of both attacker and attacked brands, an aspect missing in existing literature. We conclude this research with evidence that communication focus and reaction of competitors are crucial dimensions that moderate the effectiveness of an advertising decision. Further, alternative formats of advertising may be as productive as CA, given the right combination with communication focus. Finally, the two highlights of this research obtained in the theoretical model building exercise are as follows. 1) It demonstrates that in a competitive market without extreme asymmetry amongst players, CA is the Nash equilibrium strategy that is also Pareto optimal. This is a situation that does not frequently arise in noncooperative games literature. 2) Although the proposed model needs additional extension and generalization, it is expected to advance further research into the competitive dynamics of advertising decisions, which incorporate the critical cross-effects of choice of advertising format and ensuing expenditure.