An Integrated Model of Alternative Mechanisms of In-Store Display and Feature Advertising on Brand Choice

Abstract

Although many studies have documented that in-store displays and feature advertising can significantly increase brand choice probabilities, the mechanism through which they affect the choice decision process is not well understood. The marketing literature has suggested two prominent decision mechanisms through which their effects may take place, which I call: the price cut proxy effect and the consideration set formation effect. The primary objective of this study is to jointly examine these two decision mechanisms suggested in the literature using scanner panel data of actual purchase behavior. I construct a brand choice model based on the behavioral premises of both effects. The proposed model allows consumers to use a combination of various decision processes with different probabilities, and accommodates the correlation in utilizing different decision mechanisms of display and feature ad. Results of the empirical analysis reveal distinct consumer segments with regard to their tendenc ies to use displays and/or feature ads as price cut proxies or for forming consideration sets, and the pattern is consistent with consumer characteristics in each segment, such as degree of state dependence and price sensitivity. Findings from this study shed light on some mixed patterns of promotion interaction effects documented in the literature, and also have interesting implications for promotion decisions.