Understanding the Role of Adstock in Advertising Decisions

50 Pages Posted: 30 May 2012

See all articles by Maarten J. Gijsenberg

Maarten J. Gijsenberg

University of Groningen - Department of Marketing & Marketing Research

Harald J. van Heerde

University of Waikato. Management School

M. G. Dekimpe

Catholic University of Leuven (KUL) - Department of Applied Economics; Erasmus Research Institute of Management (ERIM)

Vincent R. Nijs

Northwestern University - Department of Marketing

Date Written: August 3, 2011

Abstract

Adstock plays a central role in advertising research. Adstock, or goodwill, is the cumulative value of a brand’s advertising at a given point in time. A critical assumption in many advertising models is that managers take Adstock into account when making their advertising decisions. However, there is little empirical evidence to support this basic premise. Therefore, we develop a multivariate heterogeneous Tobit-II model to determine whether the level and rate of change in a brand’s Adstock influence the timing and/or magnitude of advertising investments. We calibrate the model on a comprehensive data set covering the weekly advertising expenditures of close to 750 brands in 129 CPG categories. We find that advertising timing and magnitude decisions do rely on Adstock levels and changes. The reliance is stronger for larger brands and more frequently advertising brands. We also find that responding to changes in Adstock is associated with a higher advertising elasticity. On the other hand, inertia in advertising decision-making, reflected in a strong reliance on past Adstock levels, is linked with a lower advertising elasticity.

Keywords: econometrics, Bayesian estimation, time series, advertising

Suggested Citation

Gijsenberg, Maarten J. and van Heerde, Harald J. and Dekimpe, Marnik and Nijs, Vincent R., Understanding the Role of Adstock in Advertising Decisions (August 3, 2011). Available at SSRN: https://ssrn.com/abstract=1905426 or http://dx.doi.org/10.2139/ssrn.1905426

Maarten J. Gijsenberg (Contact Author)

University of Groningen - Department of Marketing & Marketing Research ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 50 363 8249 (Phone)
+31 50 363 7970 (Fax)

Harald J. Van Heerde

University of Waikato. Management School ( email )

Hamilton
New Zealand

Marnik Dekimpe

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 16 326 957 (Phone)
+32 16 326 732 (Fax)

HOME PAGE: http://www.econ.kuleuven.ac.be/tew/academic/market/members/MarnikDekimpe.htm

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1715/9576 (Phone)
+31 10 408 9011 (Fax)

HOME PAGE: http://web.eur.nl/fbk/dep/dep3/about/members/people/mdekimpe

Vincent R. Nijs

Northwestern University - Department of Marketing ( email )

Kellogg School of Management
2001 Sheridan Rd.
Evanston, IL 60208
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
403
Abstract Views
1,955
rank
75,217
PlumX Metrics