Advertising’s Sequence of Effects on Consumer Mindset and Sales*

Shuba SrinivasanAdele and Norman Barron Professor of MarketingBoston University

* With A. Valenti, G.Yildirim, M. Vanhuele, and K. Pauwels

How advertising works

Advertising Sales

Intermediate factorsCognition

ExperienceAffect

Vakratsas and Ambler, 1999

Classical HoEAdvertising

Sales

Cognition

Affect

Experience

Barry and Howard, 1990; Lavidge and Steiner, 1961; Petty and Cacioppo, 1984, 1986; Vakratsas and Ambler, 1999; Vaughn 1980, 1986

Simultaneous effectsAdvertising

Sales

Cognition

Affect

Experience

Vakratsas and Ambler (1999)

Integrated HoEAdvertising

Sales

Cognition

Affect

Experience

Bruce, Peters and Naik 2012

HoE, dead or alive?Vakratsas and Ambler

(1999)

CAE are simultaneously triggered to drive sales

Based on a literature review

Bruce, Peters, and Naik(2012)

Adv. simultaneously triggers sales and CAE to

initiate HoE

Based on a single brand

Dead Alive

Research questions

1. Is the HOE in advertising dead or alive?

2. Does the HoE framework generalize across brands and products?

3. Is there a prevalent HoE sequence?

4. Do framework or sequence depend on brand and category characteristics?

Alternative models

Hierarchy type Model Advertising Triggers

Hierarchy sequence

Purchase reinforcement Dynamics

Classical

1 Only E E-C-A2 Only C C-E-A3 Only E E-A-C4 Only C C-A-E5 Only A A-E-C6 Only A A-C-E

Simultaneous 7 C A E Simultaneous Only E

Integrated

8

C A E Sales

E-C-A

C A E Sales C A E Sales

9 C-E-A10 E-A-C11 C-A-E12 A-E-C13 A-C-E

Modeling requirements• Impose causal sequence of HoE according to theory (e.g., Adv -> A

-> C -> E -> Sales)

• Intermediate factors (C, A, E) and sales are endogenous;

• Marketing variables (advertising, price, promo) as exogenous or endogenous

• Intermediate factors (C, A, E) and sales are dynamic

• State space models

o DFMs (Bruce et al. 2012): similar results, but sample size issues

o Restricted VARs

Restricted VAR

DataMarketing

Sales

Mindset metrics

Brand characteristics

Category characteristics

• 178 brands from 18 categories in France

• Four-weekly data from January 2003 to July 2010

• Panel of 12,000 households

• Source: Brand performance tracker by Kantar Worldpanel

• Panel of 1,100 respondents in France

• Source: primary data

178 FMCG brands from 18 categories

Best model (Brand 1 in beer)HoE Model LL AIC BIC

Classical

1 -765.1 1,592.1 1,671.92 -755.7 1,573.4 1,653.23 -774.5 1,611.0 1,690.84 -765.0 1,592.0 1,671.95 -764.9 1,591.8 1,671.66 -766.6 1,595.1 1,674.9

Vakratsas-Ambler 7 -763.9 1,595.8 1,683.3

Integrated

8 -724.4 1,530.7 1,636.39 -716.4 1,514.8 1,620.410 -724.1 1,530.1 1,635.711 -723.9 1,529.9 1,635.412 -724.4 1,530.8 1,636.313 -713.9 1,509.7 1,615.3

Model with best fit to data: Integrated HOE (ACE sequence) is operating HoE

RQ 1

HoE is alive!• 94% of brands (168 of 178) have Integrated HoE as operating

framework

• 4% of brands (6 of 178) have Classical HoE as operating framework

• Remaining 4 brands, the two hierarchies indistinguishable

RQ 1

ACE is the most common sequence

Model Sequence Frequency %1-6 All Classical 4 4%8 E-C-A 6 7%9 C-E-A 17 19%10 E-A-C 4 4%11 C-A-E 6 7%12 A-E-C 15 17%13 A-C-E 38 42%

Total 90

RQ 2

Moderators of sequence

RQ 3

𝑃𝑟𝑜𝑏 𝑦! = 1| 𝒙! =exp(𝒙!𝜽)

1 + exp(𝒙!𝜽)

𝒙!𝜽 = 𝜃"𝐻𝑒𝑑𝑜𝑛𝑖𝑐! + 𝜃#𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑡𝑖𝑎𝑡𝑖𝑜𝑛! + 𝜃$𝑀𝑎𝑟𝑘𝑒𝑡𝑆ℎ𝑎𝑟𝑒! + 𝐶𝑜𝑛𝑡𝑟𝑜𝑙𝑠

i: Brand

Moderators of sequence

RQ 3

E→C→A C→E→A E→A→C C→A→E A→E→C A→C→E

Dependent Variablem8 m9 m10 m11 m12 m13

Hedonic nature 4.74 0.28 -2.21 1.79 1.23 -2.48(3.18) (1.21) (2.31) (2.11) (1.33) (1.16)

Differentiation 0.22 0.04 0.21 0.03 0.00 -0.24(0.09) (0.05) (0.09) (0.08) (0.05) (0.07)

Market Share 0.15 0.02 -0.32 -0.07 -0.02 -0.08(0.1) (0.05) (0.34) (0.12) (0.06) (0.05)

Constant -5.91 -1.90 -5.47 -2.47 -1.37 1.83(1.7) (0.7) (1.77) (1.03) (0.71) (0.73)

Obs 90 90 90 90 90 90LL -14.233 -43.199 -12.171 -21.198 -39.963 -48.629Pseudo R2 0.354 0.010 0.256 0.038 0.015 0.207

Robustness and Managerial Implications1. Simultaneity of marketing? Use only lagged effects ✅

2. Inclusion / exclusion of control variables? ✅

3. Small brands (< 1% market share)? ACE dominates ✅

4. Dynamic Factor Models? Yes, Integrated and ACE ✅

5. Responsiveness of C, A, and E to advertising

6. Sales conversion of C, A, and E

7. Moderators of C, A, and E responsiveness to advertising

Cognition is most responsive to advertising

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

COGNITION AFFECT EXPERIENCE

Last factor in sequence drives sales most

Conclusions: HoE is alive!1. Integrated HoE framework generalizes across brands

2. ACE is the most common sequence

3. ACE even more prevalent for less differentiated brands, and for utilitarian vs. hedonic products

4. Cognition is most responsive to advertising

5. Last factor in sequence drives sales most

Shuba Srinivasanssrini@bu.edu

Thank you!