An exploratory analysis of the determinants of cooperative advertising participation rates
- PDF / 218,410 Bytes
- 12 Pages / 439.204 x 666.007 pts Page_size
- 58 Downloads / 158 Views
An exploratory analysis of the determinants of cooperative advertising participation rates Matthew G. Nagler
C
Springer Science + Business Media, Inc. 2006
Abstract The paper offers an exploratory empirical investigation of the determinants of cooperative advertising participation rates. Using data for 2,286 brands, we examine the relationship of participation rates to national advertising expenditures by brand. We also consider how participation rates vary with average manufacturers’ margins by industry, average retail margins by category, and additional category-level variables. Reflecting the discrete nature of the dependent variable, the analysis employs discrete choice estimation techniques instead of OLS regression. The results reveal a significant quadratic relationship between advertising and participation rates. We interpret this and other significant findings in the context of existing work.
Keywords Cooperative advertising . National advertising . Discrete choice models
Cooperative advertising arrangements, through which manufacturers reimburse retailers for promoting the manufacturer’s product, have become a mainstay of marketing practice. Manufacturers take advantage of retailers’ access to a broad array of locally-focused promotional tools, ranging from the retailer’s circular and local newspapers to reduced-rate television advertising, thereby enriching their marketing mix and improving overall effectiveness. With recent innovations in information technology, the advantages of cooperative advertising are made more compelling for the manufacturer, as the retailer’s ability to provide benefit through its access to local information is further enhanced (Clark, 2000). Trends in manufacturer funding of cooperative advertising reflect the phenomenon’s increasing importance. Total expenditures on cooperative advertising in 2000 were estimated
M. G. Nagler () Department of Economics, Accounting and Business Administration, Lehman College, City University of New York, 250 Bedford Park Boulevard West, Bronx, NY 10468-1589, USA e-mail: [email protected] Springer
92
Market Lett (2006) 17: 91–102
at $15 billion,1 compared to $900 million in 1970,2 nearly a four-fold increase in real terms. Real total advertising expenditures grew by a factor of less than three during the same period.3 The overall significance and growth trend of cooperative advertising suggest that marketers should seek a thorough understanding of its role and use in practice. The percentage of advertising costs that manufacturers reimburse, known as the participation rate, is a key decision variable in cooperative advertising management. Past empirical research on this variable has been scarce. The sole systematic analysis in the literature (Dutta et al., 1995) sheds light on how participation rates vary by broad product category— consumer vs. industrial products and convenience vs. nonconvenience consumer products— and by one industry-level variable, manufacturer concentration. Yet there is still much that is not underst
Data Loading...
