Due to the important role of advertising in marketing practice, its effects have been the research focus since 1920. Among relevant research fields, the issue that has been paid close attention in the economic field is its impact on consumer welfare. Issues focused in the marketing field are its impacts on consumer perception, feelings, attitudes, behaviors, and competitive interaction among firms. However, in these two fields the integrated channel is the focused scenario where the advertising works in vast majority of literatures. Only very few of them investigate effects of advertising in other channel structure context. However, in practice indirect channels are very common. There may be interactions between advertising and channel structure due to the existence of the independent retailer and the specific degree of competition. Since advertising is an important strategic instrument, it deserves to pay more efforts to relate the advertising and channel structure. This dissertation use game-theoretical approach to target three issues relating the advertising and channel structure.
The first issue focuses on discussing the differential of choices between informative and persuasive advertising across three channel structure contexts for two competing manufacturers. This dissertation argues that the use of advertising strategy crucially depends on the channel structure. Specifically, it shows that when manufacturers delegate the sales responsibility to dedicated retailers, informative advertising may yield a higher profit for the manufacturers due to its pro-competitive nature. On the contrary, persuasive advertising should be used more extensively when either the manufacturers sell directly to the end consumers or sell through a common retailer. This therefore provides a theoretical foundation for why both advertising strategies can emerge as optimal responses from the manufacturers' viewpoints and subsequently provides handy guidelines for when these advertising strategies should be used in various scenarios.
The second issue is about the choice between direct and indirect channels. The introduction of independent retailers has long been recognized as a buffer that alleviates the price competition between channels. If the sales responsibility is delegated to the retailers, the retail prices are driven upwards, thereby allowing the manufacturers to avoid the head-to-head competition. In this dissertation, we argue that this effect may be counter-balanced if the manufacturers are privileged with sufficiently large loyal segments. It shows that, selling directly to the consumers (through the direct channel) may be more beneficial for the manufacturers than delegation with the presence of competition, because the low prices due to the intense competition may help the manufacturers to extract more revenue from loyal consumers. Furthermore, if the manufacturers compete along dimensions that differ from prices, they may be further in favor of the direct channel and less concerned about price competition. In particular, this dissertation shows that if the manufacturers also compete on their advertising strategies, delegating to the retailers may force them to invest on the wasteful advertising, which could be prevented had the manufacturers sold the products themselves.
The third issue discusses the combativeness of the persuasive advertising in the common retailer channel. The existing marketing literature suggests that persuasive advertising elicits counteractions from competing manufacturers and consequently leads to wasteful cancellation of the advertising effects. However, recent empirical studies document a surprisingly negative result against this conventional wisdom. To provide a theoretical ground for this empirical puzzle, we propose a novel way to model the advertising effect on the consumers' preference that incorporates two critical driving forces: on one hand, advertising shifts the consumers' preferences towards the advertised product (the "absolute effect"); on the other hand, it also makes the rival product a less desirable substitute from the consumers' viewpoints (the "relative effect"). Through our alternative interpretation of persuasive advertising, we show that channel conflict can be alleviated if a manufacturer adopts persuasive advertising that wisely "targets" appropriate consumers. In stark contrast with the established work, this advertising strategy may give rise to profit increases for every channel member, including the rival manufacturer and the retailer that were previously believed to always counteract/ resist to such persuasive advertising. We further identify the detailed operating regimes within which such a manufacturer-initiated persuasive advertising strategy is no more harmful for other channel members.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-1202108-231844 |
| Date | 02 December 2008 |
| Creators | Wang, Chih-jen |
| Contributors | Mei-chiun Tseng, Y.H., Chiou, Chi-cheng Wu |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-1202108-231844 |
| Rights | unrestricted, Copyright information available at source archive |
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