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The Measurement of Industry Advertising Effects

The statement, "advertising influences primary demand," is one that forms the basis for many marketing plans and forecasts. In addition to its practical relevance, this assertion about the effect of advertising on total industry (or primary) demand is an important element in any explanation of advertising-sales behavior. Although some studies have reported a positive influence of primary advertising (advertising by trade associations) on primary demand, no conclusive empirical evidence has been brought to bear on the major premise. The question of whether or not selective advertising (advertising by individual companies) influences primary demand and how remains one for future research. Recent work on the measurement of sales response to marketing decision variables, particularly advertising, is beginning to catch the attention of marketing managers because many researchers and practitioners share the same basic goal: to predict and control the consequences of a firm's actions on its sales and profit. Thus, the approach of this article is to discuss first a theory concerning practical concepts such as the impact of advertising on a company's sales, on its competitor's sales, and on total industry sales, then to discuss more formally the measurement of such concepts. The practical relevance of such work lies in application of the model to real market situations. The application no doubt would be by staff marketing or operations researchers, perhaps not until the scientific process of scrutiny and refinement is complete. Nevertheless, the ultimate goal is to explain market behavior, and thus to provide managers with answers to basic questions about the effectiveness of advertising. This article offers an analytical framework for assessing the nature of different industry advertising effects. Necessary and sufficient conditions for distin-