Coordination in Multibrand, Multimedia Advertising: Is It Always a Good Thing?

The growing online retail market has led to the prevalence of multichannel retailing. Meanwhile, retailers are increasingly combining multichannel retailing with a multibranding strategy. Although this can further increase the retailer’s sales, it brings new advertising challenges. Multibrand, multichannel retailers usually launch advertising campaigns for different brands on multiple media. Thus, the retailer’s advertising efforts fall into a set of brand-media units. Each unit’s advertising efforts can affect the sales of all brands on all channels. Therefore, retailers need to coordinate the advertising efforts of different units to maximize advertising efficiency in propelling sales. So far, the optimization problem of multibrand, multimedia advertising has not been analyzed in the literature, and our study aims to bridge this gap. We develop a stochastic differential equation model to estimate the impact of multimedia advertising on sales in a multibrand, multichannel context. Using the data from a jewelry retailer in the United States, we show that our model is effective in predicting future sales driven by advertising. Afterward, we formulate the advertising optimization problems under four coordination strategies: (i) noncoordination, (ii) brand coordination, (iii) media coordination, and (iv) global coordination. By solving the problem for each strategy, the retailers can obtain the optimal expenditure for each unit under that strategy. Finally, we compare the retailer’s profits under four strategies. Interestingly, we find that brand or media coordination may result in a profit lower than noncoordination. Our findings provide insights regarding the selection of coordination strategies for multibrand, multichannel retailers with multimedia advertising campaigns, especially when they cannot do global coordination.