IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v7y1998i3p363-396.html
   My bibliography  Save this article

The Effectiveness and Targeting of Television Advertising

Author

Listed:
  • Ron Shachar
  • Bharat N. Anand

Abstract

Television networks spend about 16% of their revenues on tune‐ins, which are previews or advertisements for their own shows. In this paper, we examine two questions. First, what is the informational content in advertising? Second, is this level of expenditures consistent with profit maximization? To answer these questions, we use a new and unique micro‐level panel dataset on the television viewing decisions of a large sample of individuals, matched with data on show tune‐in advertisements. The difference in effectiveness of advertisements between “regular” shows (about which viewers are assumed to have substantial information a priori) and “specials” (about which they have very little) reveals the value of information in advertisements and the different roles that information can play. The number of exposures for each individual is likely to be correlated with their preferences, since networks target their audiences. We address this endogeneity problem by controlling for observed, and integrating the unobserved, characteristics of individuals, and find that the estimated effects of tune‐ins are still large. Finally, we find that actual expenditures on tune‐ins closely match the predicted optimal levels of spending.

Suggested Citation

  • Ron Shachar & Bharat N. Anand, 1998. "The Effectiveness and Targeting of Television Advertising," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(3), pages 363-396, September.
    • Handle: RePEc:bla:jemstr:v:7:y:1998:i:3:p:363-396
    DOI: 10.1111/j.1430-9134.1998.00363.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1430-9134.1998.00363.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1430-9134.1998.00363.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    2. Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 63-81.
    3. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
    4. Olney, Thomas J & Holbrook, Morris B & Batra, Rajeev, 1991. "Consumer Responses to Advertising: The Effects of Ad Content, Emotions, and Attitude toward the Ad on Viewing Time," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 17(4), pages 440-453, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jungwon Yeo, 2017. "The Weekend Effect in Television Viewership and Prime-Time Scheduling," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(3), pages 315-341, November.
    2. Celik, Levent, 2016. "Competitive provision of tune-ins under common private information," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 113-122.
    3. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    4. Doraszelski, Ulrich & Draganska, Michaela & Clark, C. Robert, 2007. "Information or Persuasion? An Empirical Investigation of the Effect of Advertising on Brand Awareness and Perceived Quality using Panel Data," Research Papers 1971, Stanford University, Graduate School of Business.
    5. Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum 18/2001, Oslo University, Department of Economics.
    6. Dr. Makarand Upadhyaya, 2015. "The Impact of Humorous Television Advertisement in Customer Opinion in Bahrain," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 6(3), pages 20-25, September.
    7. Levent Çelik, 2008. "Strategic Informative Advertising in a Horizontally Differentiated Duopoly," CERGE-EI Working Papers wp359, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    8. Levent Çelik, 2008. "Monopoly Provision of Tune-ins," CERGE-EI Working Papers wp362, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    9. C. Clark & Ulrich Doraszelski & Michaela Draganska, 2009. "The effect of advertising on brand awareness and perceived quality: An empirical investigation using panel data," Quantitative Marketing and Economics (QME), Springer, vol. 7(2), pages 207-236, June.
    10. Niebler, Sarah & Urban, Carly, 2017. "Does negative advertising affect giving behavior? Evidence from campaign contributions," Journal of Public Economics, Elsevier, vol. 146(C), pages 15-26.
    11. Nickolay V. Moshkin & Ron Shachar, 2002. "The Asymmetric Information Model of State Dependence," Marketing Science, INFORMS, vol. 21(4), pages 435-454, August.
    12. Bharat N. Anand & Alexander Galetovic, 2000. "Weak Property Rights and Holdup in R&D," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 615-642, December.
    13. Levent Çelik, 2008. "Viewer Sampling and Quality Signaling in a Television Market," CERGE-EI Working Papers wp363, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    14. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
    15. Nilssen, Tore & Sørgard, Lars, 2000. "TV Advertising, Program Quality, and Product-Market Oligopoly," Competition Policy Center, Working Paper Series qt2zp943hj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    16. Bharant N. Anand & Alexander Galetovic, 1998. "Weak Property Rights and hold-up in R&D," Documentos de Trabajo 39, Centro de Economía Aplicada, Universidad de Chile.
    17. Chen, Linfeng & Hu, Qibing & Lv, Qiang, 2020. "The economics of TV tune-in," Economic Modelling, Elsevier, vol. 89(C), pages 189-200.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Laurent Cavenaile & Pau Roldan-Blanco, 2021. "Advertising, Innovation, and Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 251-303, July.
    2. Lola Esteban & José M. Hernández & José Luis Moraga‐González, 2006. "Customer Directed Advertising and Product Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 943-968, December.
    3. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    4. Guofang Huang & Matthew Shum & Wei Tan, 2019. "Is pharmaceutical detailing informative? Evidence from contraindicated drug prescriptions," Quantitative Marketing and Economics (QME), Springer, vol. 17(2), pages 135-160, June.
    5. Whelan Adele, 2019. "Entry Deterrence, Coordinating Advertising and Pricing in Markets with Consumption Externalities," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-16, June.
    6. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
    7. Moraga-Gonzalez, Jose Luis, 2000. "Quality uncertainty and informative advertising," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 615-640, May.
    8. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    9. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    10. Guillem Roig, 2017. "Product Compatibility as an Strategy to Hinder Entry Deterrence," Documentos de Trabajo 15773, Universidad del Rosario.
    11. Yuxin Chen & Qihong Liu, 2022. "Signaling Through Advertising When an Ad Can Be Blocked," Marketing Science, INFORMS, vol. 41(1), pages 166-187, January.
    12. Simon P. Anderson & Régis Renault, 2013. "The Advertising Mix for a Search Good," Management Science, INFORMS, vol. 59(1), pages 69-83, April.
    13. Nils‐Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 113-126, July.
    14. Soberman, David A. & Xiang, Yi, 2022. "Designing the content of advertising in a differentiated market," International Journal of Research in Marketing, Elsevier, vol. 39(1), pages 190-211.
    15. Blasco, Andrea & Sobbrio, Francesco, 2012. "Competition and commercial media bias," Telecommunications Policy, Elsevier, vol. 36(5), pages 434-447.
    16. Kyle Bagwell & Garey Ramey, 1988. "Advertising, Coordination, and Signaling," Discussion Papers 787, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    17. Matthew Shum, 2004. "Does Advertising Overcome Brand Loyalty? Evidence from the Breakfast‐Cereals Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 241-272, June.
    18. Tingting Nian & Arun Sundararajan, 2022. "Social Media Marketing, Quality Signaling, and the Goldilocks Principle," Information Systems Research, INFORMS, vol. 33(2), pages 540-556, June.
    19. Rauch, Ferdinand, 2013. "Advertising expenditure and consumer prices," International Journal of Industrial Organization, Elsevier, vol. 31(4), pages 331-341.
    20. Bharat Anand & Ron Shachar, 2009. "Targeted advertising as a signal," Quantitative Marketing and Economics (QME), Springer, vol. 7(3), pages 237-266, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:7:y:1998:i:3:p:363-396. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.