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Information or Persuasion? An Empirical Investigation of the Effect of Advertising on Brand Awareness and Perceived Quality using Panel Data

Author Info

  • Doraszelski, Ulrich

    (Harvard U)

  • Draganska, Michaela

    (Stanford U)

  • Clark, C. Robert

    (HEC Montreal)

Abstract

We investigate the dominant role of advertising - whether it provides information or changes consumers' brand perceptions - for a wide range of product categories. For the empirical analysis, we assembled a panel data set that combines annual brand-level advertising expenditures for over three hundred brands with measures of brand awareness and perceived quality from a large-scale consumer survey. Advertising is modeled as a dynamic investment in a brand's stocks of awareness and perceived quality and we ask how such an investment changes brand awareness and quality perceptions. Our panel data allow us to control for unobserved heterogeneity across brands and to identify the effect of advertising from the time-series variation within brands. They also allow us to account for the endogeneity of advertising through recently developed dynamic panel data estimation techniques. We find that advertising has consistently a significant positive effect on brand awareness but no significant effect on perceived quality.

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Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1971.

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Date of creation: Jul 2007
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Handle: RePEc:ecl:stabus:1971
Contact details of provider: Postal: Stanford University, Stanford, CA 94305-5015
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  18. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  19. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  20. 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, 09.
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Cited by:

  1. Catherine Tucker, 2011. "Virality, Network Effects and Advertising Effectiveness," Working Papers 11-06, NET Institute.

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