Lecture22_Advertising_Econ121_Fall2010

Lecture22_Advertising_Econ121_Fall2010 - Lecture 22...

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Click to edit Master subtitle style  2/2/11 Lecture 22 Advertising Basics Econ 121: Industrial Organization UC Berkeley Fall 2010 Prof. Cristian Santesteban
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 2/2/11 Introduction Pharmaceutical industry – high R&D budgets But even larger are advertising and marketing expenditures Soft drinks Price competition is secondary to advertising competition Role of advertising even more important in world of paid search
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 2/2/11 Persuasion versus Information Search good PCs Experience good Wine Credence good Medical service
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 2/2/11 Search, Experience, or Credence? Package holidays Insurance Organic produce Vitamin pills Paper clips
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 2/2/11 Persuasion versus Information Informative versus Persuasive Advertising Informative: describes product’s characteristics Persuasive: attempts to change consumer preferences
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 2/2/11 Example: Yoplait Scanners at supermarkets Nielsen pairs scanner data with household TV viewing patterns Yoplait 150 – new yogurt introduced in 1987 Ackerberg studies importance of advertising in Yoplait 150 consumption
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 2/2/11 Example: Yoplait Econometric results: Probability of buying Yoplait 150 = 1.85 * Advertising Exposure – 0.24*Advertising Exposure*Number of Previous Purchases + Other Variables Advertising exposure = the number of 30 second ads observed by each consumer during the week of the
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 2/2/11 Example: Yoplait First coefficient: the more Yoplait spends on advertising, the greater the probability of purchase Second coefficient: the more a
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Lecture22_Advertising_Econ121_Fall2010 - Lecture 22...

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