The Targeting of Advertising

Ganesh Iyer (), David Soberman () and J. Miguel Villas-Boas
Additional contact information
Ganesh Iyer: Haas School of Business, University of California, Berkeley, Berkeley, California 94720-1900
David Soberman: INSEAD, Boulevard de Constance, Fontainebleau, France 77305

Marketing Science, 2005, vol. 24, issue 3, 461-476

Abstract: An important question that firms face in advertising is developing effective media strategy. Major improvements in the quality of consumer information and the growth of targeted media vehicles allow firms to precisely target advertising to consumer segments within a market. This paper examines advertising strategy when competing firms can target advertising to different groups of consumers within a market. With targeted advertising, we find that firms advertise more to consumers who have a strong preference for their product than to comparison shoppers who can be attracted to the competition. Advertising less to comparison shoppers can be seen as a way for firms to endogenously increase differentiation in the market. In addition, targeting allows the firm to eliminate “wasted” advertising to consumers whose preferences do not match a product’s attributes. As a result, the targeting of advertising increases equilibrium profits. The model demonstrates how advertising strategies are affected by firms being able to target pricing. Target advertising leads to higher profits, regardless of whether or not the firms have the ability to set targeted prices, and the targeting of advertising can be more valuable for firms in a competitive environment than the ability to target pricing.

Keywords: media precision; advertising; targeting; price discrimination (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (184)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.1050.0117 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:24:y:2005:i:3:p:461-476

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().