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Mr. June Lee, a doctoral student at º£½ÇÉçÇø in the Marketing area will be presenting his thesis defense entitled:

Three Essays on the Effectiveness of Advertising and its Dynamics

Thursday, December 5, 2024, at 1:00p.m.

(The defense will be conducted on Zoom)

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Student Committee Chair: Professor Demetrios Vakratsas

Please note that the Defence will be conducted on Zoom. Only the student and their committee members will participate in the presentation.

Abstract:

A source of difficulty in understanding the effects of advertising stems from the dynamic nature of the business environment. While advertising dynamics at the macro level have been investigated in extant literature, advertising dynamics at the micro level resulting from customer heterogeneity and microsegmentation have yet to be studied. This thesis empirically assesses and investigates how consumers’ responses to advertising change over time by focusing on customer heterogeneity, which has not been done in prior literature.

The first essay investigates the differential responses of new and repeat patients to direct-to consumer advertisements in the pharmaceutical industry. Due to an advertising content regulation in the Canadian pharmaceutical industry, a help-seeking message can only include disease information without brand information and should primarily influence new patients. Conversely, a reminder advertisement, which only includes brand information and not disease nor efficacy information, should primarily influence repeat patients. Results suggest that both types of patients are affected by the advertisements, which implies the regulation does not work. Additionally, reminder advertisements become more effective at persuading new patients as consumers become more aware of the drug, suggesting heterogeneity in advertising effectiveness over time whereas it remains stable for repeat patients.

The second essay examines the presence of heterogeneous structural parameters underlying advertising dynamics, where the source of heterogeneity is driven by consumers’ loyalty to a brand. By using individual level purchase data for a frequently purchased consumer packaged good and data on individual advertising exposure, I propose a state-space choice model with Markovian loyalty. I find that, in addition to having higher advertising elasticities, loyal consumers are likely to have more favorable advertising dynamics in terms of higher goodwill retention and lower likelihood of over-exposure than non-loyal consumers. Hence, behavioral-based segmentation through loyalty status can improve advertising targeting.

In the last essay, I consider regional heterogeneity in response to a national brand’s cross-media advertising campaign. More specifically, I investigate the role of dynamics in advertising effectiveness from sequential exposures to advertisements and how the resulting synergy differs based on geographical region. Using the same dataset as the second essay, I propose a dynamic choice model that accounts for purchase timing and sequential exposures to advertisements. I find evidence for asymmetric dynamic synergistic effects where prior online exposure enhances future television exposure but not vice versa. Additionally, I find evidence for regional variation in the presence of synergy.