Strategic incentives for comparative advertising investments in non-zero-sum competition and economic consequences

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3 Scopus citations

Abstract

Persuasive advertising is viewed as an effective tool to affect willingness-to-pay of customers for a firm's product. In their use of persuasive advertising, firms typically face the choice of whether to tout the benefits of their own products without mentioning rival products (self-promotional advertising) or make references to rival products while promoting their own products (comparative advertising). A concomitant (and intrinsic) issue in the use of comparative advertising is whether to portray rival products negatively or positively and the level of comparative intensity (the valence of comparative advertising). Although it is often criticized and disapproved of by business decision makers and its effectiveness has been a subject of contentious debate, comparative advertising is used prevalently by firms in consumer goods markets. In this paper, we examine the strategic incentives of competing firms to abandon their self-promotional advertising in favor of comparative advertising, the ways in which they choose a positive or negative valence in their comparative advertising, and the economic consequences of these decisions. We consider a simultaneous (and a leader-follower Stackelberg) game between two asymmetric firms vying for customers in a market that is not characterized by zero-sum competition. We also study the possibility that comparative advertising elicits positive or negative market externalities on the advertised product. We seek market- and channel-based explanations for why firms may opt to undertake comparative advertising (in lieu of self-promotional advertising) and use its constructive or combative form. We show that the use of comparative advertising can be an effective tactic in attaining certain objectives and when carefully executed in certain ways, and detrimental to not only the advertising firm but also the product category in other ways.

Original languageEnglish
Pages (from-to)1059-1073
Number of pages15
JournalEuropean Journal of Operational Research
Volume312
Issue number3
DOIs
StatePublished - Feb 1 2024

Scopus Subject Areas

  • General Computer Science
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

Keywords

  • Comparative advertising
  • Comparison valence
  • Competition
  • Coopetition
  • OR in marketing

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