TY - JOUR
T1 - Manufacturer defensive and offensive advertising in competing distribution channels
AU - Martín-Herrán, Guiomar
AU - Sigué, Simon P.
N1 - Publisher Copyright:
© 2019 The Authors. International Transactions in Operational Research © 2019 International Federation of Operational Research Societies
PY - 2020/3/1
Y1 - 2020/3/1
N2 - This paper investigates how two competing manufacturers should invest in defensive and offensive advertising in a two-segment market and whether they should each adopt a decentralized or an integrated channel if their goal is to maximize total channel profits. We find that manufacturers in decentralized channels can exclusively undertake either of the two types of advertising or combine the two at the equilibrium. In integrated channels, they can either combine the two or exclusively undertake defensive advertising. When multiple equilibria exist, strategies that combine both types of advertising should be preferred to exclusive defensive advertising strategies, which are better than exclusive offensive advertising strategies. Also, total channel profits are higher in decentralized channels than in integrated channels when the brands are moderately or highly substitutable. Conversely, total channel profits of integrated channels are higher than those of decentralized channels in areas where the brands are relatively differentiated and the offensive advertising retaliatory capacity of the rival is stronger. Theoretical and managerial implications of these findings are discussed.
AB - This paper investigates how two competing manufacturers should invest in defensive and offensive advertising in a two-segment market and whether they should each adopt a decentralized or an integrated channel if their goal is to maximize total channel profits. We find that manufacturers in decentralized channels can exclusively undertake either of the two types of advertising or combine the two at the equilibrium. In integrated channels, they can either combine the two or exclusively undertake defensive advertising. When multiple equilibria exist, strategies that combine both types of advertising should be preferred to exclusive defensive advertising strategies, which are better than exclusive offensive advertising strategies. Also, total channel profits are higher in decentralized channels than in integrated channels when the brands are moderately or highly substitutable. Conversely, total channel profits of integrated channels are higher than those of decentralized channels in areas where the brands are relatively differentiated and the offensive advertising retaliatory capacity of the rival is stronger. Theoretical and managerial implications of these findings are discussed.
KW - advertising targeting
KW - competition
KW - defensive advertising
KW - distribution channel
KW - offensive advertising
UR - http://www.scopus.com/inward/record.url?scp=85068593012&partnerID=8YFLogxK
U2 - 10.1111/itor.12693
DO - 10.1111/itor.12693
M3 - Journal Article
AN - SCOPUS:85068593012
SN - 0969-6016
VL - 27
SP - 958
EP - 983
JO - International Transactions in Operational Research
JF - International Transactions in Operational Research
IS - 2
ER -