47 Pages Posted: 26 Nov 2003
Date Written: September 3, 2003
Marketing communication plays a major role in influencing consumer purchases in new product categories. An important question about this communication is whether it plays an informative or a persuasive role over the life cycle of the new product category. We expect that consumers are not well informed about product quality in the early stages of the product life cycle but they become better informed over time. The informative role of marketing communication is likely to have a much larger effect with uninformed consumers than with consumers who are better informed. Therefore, we conjecture that marketing communication plays a predominantly informative role initially and a predominantly persuasive role later.
We develop a structural model of demand that allows for the differential impact of informative and persuasive roles of marketing communication over time. In addition, we control for the possibility that product experience also contributes to learning in such categories. We estimate our model on market-level data for the prescription antihistamines category. In our model, physician learning about new antihistamines occurs through marketing communication (detailing and meetings/seminars), and experience (past prescriptions). Specifically, our model is a random coefficients discrete choice model that allows for category expansion. The model also incorporates a Bayesian learning process through which physicians learn about the efficacy of this new class of drugs. We estimate our model using a GMM-based methodology.
We find that, on average, physicians are most sensitive to detailing relative to other promotional activities. However, more interestingly, we find evidence for both informative and persuasive effects of detailing on physicians' prescription behavior. In addition, we find that detailing plays a primarily informative role in the introductory phase (typically 6-14 months post introduction) but the persuasive role dominates later on. The finding that persuasive effects are significant may explain why firms continue to detail long after a drug is introduced. In terms of resource allocation for detailing over time, our results suggest that firms should follow a pattern of heavier detailing at the introduction phase followed by lower levels.
Keywords: Marketing Communication, Detailing, Learning Models, Discrete Choice Models, Structural Models, Generalized Method of Moments, Pharmaceutical Industry, Antihistamines
JEL Classification: C35, D83, I11, M31, M37
Suggested Citation: Suggested Citation
Narayanan, Sridhar and Manchanda, Puneet and Chintagunta, Pradeep K., The Informative versus Persuasive Role of Marketing Communication in New Product Categories: An Application to the Prescription Antihistamines Market (September 3, 2003). Available at SSRN: https://ssrn.com/abstract=472881 or http://dx.doi.org/10.2139/ssrn.472881