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Information or Persuasion? An Empirical Investigation of the Effect of Advertising on Brand Awareness and Perceived Quality Using Panel Data

31 Pages Posted: 23 Aug 2007  

Ulrich Doraszelski

Harvard University - Department of Economics; University of Pennsylvania - Business & Public Policy Department

C. Robert Clark

HEC Montreal

Michaela Draganska

Drexel University

Date Written: July 2007

Abstract

We investigate the dominant role of advertising - whether it provides information or changes consumers' brand perceptions - for a wide range of product categories. For the empirical analysis, we assembled a panel data set that combines annual brand-level advertising expenditures for over three hundred brands with measures of brand awareness and perceived quality from a large-scale consumer survey. Advertising is modeled as a dynamic investment in a brand's stocks of awareness and perceived quality and we ask how such an investment changes brand awareness and quality perceptions. Our panel data allow us to control for unobserved heterogeneity across brands and to identify the effect of advertising from the time-series variation within brands. They also allow us to account for the endogeneity of advertising through recently developed dynamic panel data estimation techniques. We find that advertising has consistently a significant positive effect on brand awareness but no significant effect on perceived quality.

Keywords: industrial organization, Advertising

JEL Classification: M3, D12

Suggested Citation

Doraszelski, Ulrich and Clark, C. Robert and Draganska, Michaela, Information or Persuasion? An Empirical Investigation of the Effect of Advertising on Brand Awareness and Perceived Quality Using Panel Data (July 2007). Stanford University Graduate School of Business Research Paper No. 1971. Available at SSRN: https://ssrn.com/abstract=1007571 or http://dx.doi.org/10.2139/ssrn.1007571

Ulrich Doraszelski

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-2896 (Phone)
617-495-8570 (Fax)

University of Pennsylvania - Business & Public Policy Department

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

C. Robert Clark

HEC Montreal ( email )

3000, Chemin de la CĂ´te-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Michaela Draganska (Contact Author)

Drexel University ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States

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