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Advertising, incentives, and the upsell: how advertising differentially moderates customer- vs. retailer-directed price incentives’ impact on consumers’ preferences for premium products

Author

Listed:
  • Chadwick J. Miller

    (Washington State University)

  • Daniel C. Brannon

    (University of Northern Colorado)

  • Jim Salas

    (Pepperdine University)

  • Martha Troncoza

    (Kennesaw State University)

Abstract

Many durable goods firms use price promotion strategies and advertising simultaneously to impact consumer preferences among vertically differentiated product offerings. In this research, we use a large secondary dataset of automotive purchases (N = 323,959) to investigate how advertising spending differentially moderates the positive impact of both customer- and retailer-directed price incentives on consumers’ premium level of purchase for vertically differentiated products. We find that higher advertising spending magnifies the positive impact of customer-directed price incentives on consumers’ preference for more premium purchases. In contrast, higher advertising spending attenuates the positive impact of retailer-directed price incentives on consumers’ preference for more premium purchases. Our work is distinct from previous research, which has almost exclusively focused on the CPG industry and the effects of advertising and price promotions on general demand metrics—instead of consumers’ preferences for premium products. Our work has important implications for practitioners and consumer welfare.

Suggested Citation

  • Chadwick J. Miller & Daniel C. Brannon & Jim Salas & Martha Troncoza, 2021. "Advertising, incentives, and the upsell: how advertising differentially moderates customer- vs. retailer-directed price incentives’ impact on consumers’ preferences for premium products," Journal of the Academy of Marketing Science, Springer, vol. 49(6), pages 1043-1064, November.
    • Handle: RePEc:spr:joamsc:v:49:y:2021:i:6:d:10.1007_s11747-021-00791-1
    DOI: 10.1007/s11747-021-00791-1
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