Advertising in a Competitive Market: The Role of Product Standards, Customer Learning, and Switching Costs
Name
Advertising in a Competitive Market May 2013 final.pdf
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399.63 KB
Format
Adobe PDF
Checksum (MD5)
47f9774b0a971aad2923958c14f290e3
Author(s)
Anderson, Eric T.
Simester, Duncan
Date Issued
August 2013
Journal
Journal of Marketing Research
Publisher
American Marketing Association
Citation
Anderson, Eric T., and Duncan Simester. “Advertising in a Competitive Market: The Role of Product Standards, Customer Learning, and Switching Costs.” Journal of Marketing Research 50, no. 4 (August 2013): 489–504.
Version
Original manuscript
Abstract
Standard models of competition predict that firms will sell less when competitors target their customers with advertising. This is particularly true in mature markets with many competitors that sell relatively undifferentiated products. However, the authors present findings from a large-scale randomized field experiment that contrast sharply with this prediction. The field experiment measures the impact of competitors' advertising on sales at a private label apparel retailer. Surprisingly, for a substantial segment of customers, the competitors' advertisements increased sales at this retailer. This robust effect was obtained through experimental manipulation and by measuring actual purchases from large samples of randomly assigned customers. The effect size is also large, with customers ordering more than 4% more items in some categories in the treatment condition (vs. the control). The authors examine how these positive spillovers vary across product categories to illustrate the importance of product standards, customer learning, and switching costs. The findings have the potential to change our understanding of competition in mature markets.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1509/jmr.11.0538
