This article introduces techniques to empirically distinguish different effects of brand advertising especially in nondurable, experience-goods markets. The effects of advertising, like we discuss in the lecture, could mainly be informational effect, prestige effect, advertisements that give consumers product information should primarily affect consumers who have never tried the brand, whereas advertisements that create prestige or image effects should affect both inexperienced and experienced users. I apply this empirical argument to consumer-level data on purchases of a newly introduced brand of yogurt. Empirical results indicate that the advertisements for this brand primarily affected inexperienced users of the brand. I conclude that the primary effect of these advertisements was that of informing consumers.
The data indicate a significant effect of advertising on inexperienced consumers and either an insignificant or declining effect on experienced consumers. I conclude that these Yoplait 150 advertisements were influencing consumer behavior primarily by informing them about search and experience characteristics, not by creating prestige or associating the product with favorable images.
In the future, the author also hopes to test the
- Dynamic advertising effects: Is the time-decreasing nature of advertising common to other product markets? If the marginal effect of advertising declines more rapidly, what should be the optimal strategy for placing advertisements?
- The impact of competitor advertising:
Simplified Response
Was I convinced?
Yes, Ackerberg’s findings are convincing. His empirical evidence strongly supports that advertising in the studied market is primarily informative, significantly influencing first-time buyers by reducing information asymmetry, while having little to no effect on experienced consumers. However, its generalizability to other markets, product types, or advertising contexts remains an open question.
Was it a simple or trivial question?
No, the question is complex and far from trivial. Distinguishing between advertising’s informative and persuasive roles is challenging due to overlapping effects and confounding factors like price or promotions. The study’s implications for market efficiency and advertising regulation make it a significant research question.
Related Research Questions
- How does advertising’s role differ for search goods, experience goods, and credence goods?
- What are the long-term effects of advertising on brand loyalty?
- How do digital and personalized ads alter the balance between informative and persuasive roles?
- How does advertising’s impact vary across cultures or consumer demographics?
- What are the policy implications if advertising is primarily persuasive vs. Informative?
Conclusion
Ackerberg’s study provides a strong foundation for understanding advertising’s role, but it raises broader questions about its effects in other markets, over time, and in modern digital contexts. These questions are crucial for advancing the field and guiding policy.