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Impact of advertizing on brand’s market-shares in the automobile market:: a multi-channel attraction model with competition and carry-over effects

Joanna Morais, Christine Thomas-Agnan and Michel Simioni

No 18-878, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: This article presents a new approach to measure the impact of multi-channel advertising investments on brands’ market shares in the main segment of the French automobile market. We propose a multi-channel attraction model with adstock, in order to take into account the advertising carryover effect and the competition. This model allows to distinguish between short term and long term effect of the advertising. As, from a mathematical point of view, a vector of market shares is a composition belonging to the simplex space, i.e. subject to positivity and summing up to one contraints, we take benefit from the compositional data analysis (CODA) literature to estimate properly this model. We show how to determine the carryover parameters for each channel (outdoor, press, radio and television) in a multivariate way. We consider several model specifications with more or less complexity (cross effects between brands), including Dirichlet models, and we compare them using goodness-of-fit and prediction accuracy measures. We explain how to built confidence and prediction ellipsoids in the space of market shares. The impact of each channel on market shares is measured in terms of direct and cross elasticities. We conclude that in this market, radio only has a contemporaneous impact whereas outdoor, press and television have a large decay effect. Moreover, the advertising elasticities vary across brands and channels, and can be negative. It also turns out that positive interactions do exist between certain brands for certain media.

Keywords: Market response model; fully extended multiplicative competitive interaction model; carryover effect; adstock; Koyck model; compositional data analysis; automobile market; multi channel advertising (search for similar items in EconPapers)
JEL-codes: C10 C25 C35 C46 D12 M31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mkt
Date: 2018-01
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