Non-Informational Advertising Informing Consumers: How Advertising Affects Consumers' Decision-Making in the U.S. Auto Insurance Industry

56 Pages Posted: 3 Jan 2018 Last revised: 20 Sep 2018

See all articles by Yi-Lin Tsai

Yi-Lin Tsai

Tulane University - A.B. Freeman School of Business; University of Delaware - Alfred Lerner College of Business and Economics

Elisabeth Honka

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: August 15, 2018

Abstract

We investigate the relationship between both advertising content and quantity and several stages of consumers' decision-making, namely, unaided and aided awareness, search (consideration), and purchase. Understanding how the amount and content of advertisements affect consumers' decision-making is crucial for companies to effectively and efficiently use their advertising budgets. Our unique individual-level data contain information on purchases, consideration and awareness sets, demographic variables, and perceived prices for consumers between 2008 and 2016. We supplement these data with data on advertising quantities for all and advertising content for the main three media channels (TV, Internet, and magazines). Our results reveal that advertising quantity significantly increases consumer (unaided and aided) awareness, but has no effect on conditional consideration and conditional choice - a finding consistent with the informative role of advertising. Interestingly, the advertising content that leads to consumers' increased awareness is of non-informational nature implying that the effect on awareness is coming from non-informational content leading to better brand recall. And lastly, our results indicate that vulnerable consumers and first-time buyers are similarly affected by advertising as the remainder of the population.

Keywords: Advertising, Advertising Content, Purchase Funnel, Auto Insurance Industry

JEL Classification: D83, G22, M37

Suggested Citation

Tsai, Yi-Lin and Honka, Elisabeth, Non-Informational Advertising Informing Consumers: How Advertising Affects Consumers' Decision-Making in the U.S. Auto Insurance Industry (August 15, 2018). 2019 Academic Research Colloquium for Financial Planning and Related Disciplines. Available at SSRN: https://ssrn.com/abstract=3094448 or http://dx.doi.org/10.2139/ssrn.3094448

Yi-Lin Tsai

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

HOME PAGE: http://https://business.tulane.edu/faculty-research/faculty-profile.php?idkey=454

University of Delaware - Alfred Lerner College of Business and Economics ( email )

Newark, DE 19716
United States

HOME PAGE: http://yilint.com

Elisabeth Honka (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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