Advertising, incentives, and the upsell: how advertising differentially moderates customer- vs. retailer-directed price incentives’ impact on consumers’ preferences for premium products

Department(s)

Graziadio Business School

Document Type

Article

Publication Date

11-1-2021

Keywords

Advertising, Customer, Incentives, Premium purchase, Retailer

Abstract

Many durable goods firms use price promotion strategies and advertising simultaneously to impact consumer preferences among vertically differentiated product offerings. In this research, we use a large secondary dataset of automotive purchases (N = 323,959) to investigate how advertising spending differentially moderates the positive impact of both customer- and retailer-directed price incentives on consumers’ premium level of purchase for vertically differentiated products. We find that higher advertising spending magnifies the positive impact of customer-directed price incentives on consumers’ preference for more premium purchases. In contrast, higher advertising spending attenuates the positive impact of retailer-directed price incentives on consumers’ preference for more premium purchases. Our work is distinct from previous research, which has almost exclusively focused on the CPG industry and the effects of advertising and price promotions on general demand metrics—instead of consumers’ preferences for premium products. Our work has important implications for practitioners and consumer welfare.

Publication Title

Journal of the Academy of Marketing Science

ISSN

00920703

E-ISSN

15527824

Volume

49

Issue

6

First Page

1043

Last Page

1064

DOI

10.1007/s11747-021-00791-1

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