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Is Persuasive Advertising Always Combative in a Distribution Channel?

Department of Business Management, National Sun Yat-Sen University, Kaohsiung 80424, Taiwan, Republic of China
Industrial Engineering and Operations Research Department, University of California, Berkeley, Berkeley, California 94720
Department of Business Management, Cheng Shiu University, Kaohsiung County 83347, Taiwan, Republic of China
chicheng{at}mail.nsysu.edu.tw
chen{at}ieor.berkeley.edu
jiren{at}csu.edu.tw

The existing marketing literature suggests that persuasive advertising elicits counteractions from competing manufacturers and consequently leads to wasteful cancellation of the advertising effects. Thus, persuasive advertising is widely perceived to be combative in nature. A series of previously published papers demonstrates that appropriate targeting may partially mitigate the combative nature of persuasive advertising in that either the rival manufacturer or the retailer may benefit. In this paper, we complement their results by demonstrating the possibility that every channel member may benefit from persuasive advertising, i.e., a Pareto improvement along the distribution channel, thereby leading to the conclusion that persuasive advertising need not result in channel conflict.

Key Words: persuasive advertising; product substitutability; channel conflict; game theory
History: Received: August 14, 2008; accepted: July 5, 2009.