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Empirical Generalizations About the Impact of Advertising on Price Sensitivity and Price

Author

Listed:
  • Anil Kaul

    (Cornell University)

  • Dick R. Wittink

    (Cornell University)

Abstract

Consumers' sensitivities to price changes are an important input to strategic and tactical decisions. It has been argued that price sensitivities depend on factors such as advertising. Prior studies on the effect of advertising on consumer price sensitivity have found seemingly conflicting results. We analyze the characteristics of previous studies in marketing and generate a set of three empirical generalizations. These are (1) an increase in price advertising leads to higher price sensitivity among consumers, (2) the use of price advertising leads to lower prices, and (3) an increase in nonprice advertising leads to lower price sensitivity among consumers. These generalizations have important implications for managers and researchers. Managers need to coordinate their advertising and pricing decisions to attain maximum profits. For researchers, our summary and discussion of empirical results provide directions for future.

Suggested Citation

  • Anil Kaul & Dick R. Wittink, 1995. "Empirical Generalizations About the Impact of Advertising on Price Sensitivity and Price," Marketing Science, INFORMS, vol. 14(3_supplem), pages 151-160.
  • Handle: RePEc:inm:ormksc:v:14:y:1995:i:3_supplement:p:g151-g160
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    File URL: http://dx.doi.org/10.1287/mksc.14.3.G151
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    References listed on IDEAS

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    1. Hauser, John R. & Urban, Glen L., 1975. "A normative methodology for modeling consumer response to innovation," Working papers 785-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Griffin, Abbie. & Hauser, John R., 1991. "The marketing and R & D interface," Working papers #48-91. Working paper (Sl, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    3. Green, Paul E & Srinivasan, V, 1978. " Conjoint Analysis in Consumer Research: Issues and Outlook," Journal of Consumer Research, Oxford University Press, vol. 5(2), pages 103-123, Se.
    4. George P. Huber, 1974. "Multi-Attribute Utility Models: A Review of Field and Field-Like Studies," Management Science, INFORMS, vol. 20(10), pages 1393-1402, June.
    5. John R. Hauser, 1977. "Testing the Accuracy," Discussion Papers 286, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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