Download Experiment One

Experiment One
Basic Structure and Hypothesis
In the present study, subjects were exposed to a neutral product (conditioned stimulus) in the context of
a background feature (unconditioned stimulus), often
found in commercials. To minimize the difficulties
mentioned earlier in employing a conditioning paradigm, a number of steps were taken. To lessen demand characteristics, an unobtrusive, behavioral measure of product preference was used instead of a paper
and pencil measure. Information on the conditioned
stimulus was kept as close to zero as possible to demonstrate that the unconditioned stimulus could directly
affect product preference even where product information was minimal. A negative unconditioned stimulus condition was structured to test for mere exposure versus classical conditioning. Consistent with a
conditioning interpretation, it was hypothesized that
subjects would prefer an unexposed versus exposed
product if the exposed product were paired with a
negative unconditioned stimulus. In contrast, where
the conditioned stimulus was paired with a positive
unconditioned stimulus, subjects would choose the
exposed rather than unexposed product.
Sampie
244 undergraduates randomly assigned during registration to two sections of a first year management
course at McGill University served as subjects.
Pilot
In a pilot, a group of 10 subjects evaluated 10 different pieces of music on a scale ranging from dislike
very much (1) to like very much (5). The results of
the pilot led to the choice of a one-minute extract of
music from the movie "Grease" as the positive unconditioned stimulus (x = 4.3). One minute of classical Indian music (x=1.5) served as the negative unconditioned stimulus.^
Two different colors of a pen were used as conditioned stimuli, light blue and beige, neutral enough
so that associating them with liked or disliked music
could change color preferences. A pilot on 23 subjects
had revealed that 80% felt neutral about light blue and
beige pens, whereas, for example, yellow pens were
generally disliked, with black pens generally liked.
A second sample (N=41) of subjects were asked directly whether they preferred beige or light blue pens.
It was expected that if subjects were neutral about the
two colors, then half would choose each. The results
'Although musical preferences are affected by prior learning, music
was treated as the unconditioned stimulus since it was not being conditioned in the present experiment.
96 / Journal of Marketing, Winter 1982
supported this notion, as 22 out of 41 picked the beige
pen, 19 the light blue pen.
Design and Procedure
The experiment was carried out during class time. The
experimenter explained that an advertising agency
was trying to select music (unconditioned stimulus)
to use in a commercial for a pen (conditioned stimulus) produced by one of its clients. They would hear
some music that was being considered while they
watched the slide of the pen which the agency was
planning to advertise. The pen was inexpensive looking and cost forty-nine cents. Very little information
regarding the pen's attributes was visible in the slide.
The following conditions were structured: 1) condition Li—^Liked music, light blue pen; 2) condition
L2—Liked music, beige pen; 3) condition Dj—Disliked
music, light blue pen; 4) condition Dj—Disliked music, beige pen.^ While subjects had been randomly
assigned to the two sections of the course, a counterbalancing procedure was used to control further for
any differences that might have existed between the
two sections. To counterbalance the music and the
color of the pen within each class, one-half of the first
class was randomly assigned to the liked music—light
blue pen condition (LJ, while the other half was assigned to the disliked music—beige pen condition
(Dj). In the second class, one-half of the students
were randomly assigned to the liked music—beige
pen condition (Lj), with the other half assigned to the
disliked music—light blue pen cotidition (D^). The
two conditions in each class were run sequentially
with one-half of the class taking a break while the
other half participated in the project.
The subjects in each condition heard the music
while they watched the slide. They then evaluated the
music on a scale ranging from dislike very much (1)
to like very much (5). They were told that they would
receive either a light blue or beige pen for their help,
donated by the company that manufactures the pen.
The experimenter held up each pen briefly and commented that if they wanted a light blue one, to go over
to the left side of the room to pick one up and drop
off their question sheet in a box provided. If they
wanted a beige one, they were told to go to the right
side of the room to pick up the pen and drop off their
question sheet. Using two different locations for the
boxes (150 pens per box) of beige and blue pens, with
question sheet drop-off boxes next to them, allowed
^No condition containing both positive and negative music was
structured, since it was felt the demand characteristics would be too
great under such circumstances; subjects would be more likely to
think that we expected them to pick the color of the pen associated
with the positive music if both positive and negative music were used
in the same condition.
for a relatively unobtrusive recording of choices and
linking of these choices to the evaluation of the music.'* As a result of the music evaluation ratings, approximately 10 subjects were eliminated from each of
the four conditions. They were eliminated if in the
liked music conditions, they did not evaluate the music from "Grease" as either like very much (5) or like
somewhat (4), or in the disliked music conditions, if
they did not evaluate the Indian music as either dislike
very much (1) or dislike somewhat (2). For the remaining subjects, it was predicted that they would
pick the color of the pen they saw when they heard
the liked music and tbe alternative color when they
heard the disliked music.
Once out of class, subjects were handed the following free response question: "Why did you pick the
color of the pen you picked rather than the other
color? If you have any reasons please list them below." There was room for three answers.
Finally, a discussion about the nature of the project was held with 10 students at the end of class one
and 10 students at the end of class two. Not one mentioned that our real purpose was to influence their
particular color preferences. When told that this was
in fact the purpose, some wondered how we were able
to detect their preferences, since they did not put the
color of the pen they picked or their names down on
the question sheet. They also did not see anyone recording their choices when they picked the pens from
the boxes.
Results
Comparing the effect of liked versus disliked music
(Lj and L2 collapsed versus D, and D3 collapsed),
there was a very clearcut impact of the music in the
expected direction. As can be seen in Table 1, 74 out
of 94 subjects (79%) picked the color of the pen associated with the liked music, while only 30 out of
101 subjects (30%) picked the color of the pen associated with the disliked music.^
When asked for possible reasons for their choice,
126 out of 205 subjects (62%) indicated that they did
have a particular reason. Of these 126 people, 114
(91%) mentioned color preference as their reason.
A behavioral rather than verbal measure of preference was used,
in part, because it could be recorded unobtrusively. In addition, behavioral measures of attitudes are generally preferred to verbal measures, although less prevalent in the literature (Carismith, Ellsworth,
and Aronson 1976),
The color of pen did not seem to matter. 36 out of 43 people (84%)
picked the light blue pen when it was associated with the liked music
<L|); 38 out of 51 (74%) picked the beige rather than the light blue
pen when the beige pen was associated with the liked music (Lj).
Similarly, 17 out of 52 (33%) chose the light blue pen when it was
associated with disliked music (D,) while 13 out of 49 (26%) picked
uie beige pen when it was associated with the disliked music (D^).
These differences were not statistically significant.
TABLE 1
Liked Versus Disliked Music and Pen Choices
"Advertised"
pen
Liked
music
Disiiked
music
Pen Choice
"Non-advertised"
pen
74
20
94
30
71
101
104
91
195
x^ = 47.01 (p < .001)
^^ = .24
Only five said the music had an influence on their
choice and none mentioned that they were simply following a friend. When time permitted, subjects (n=54)
who gave color as a reason for choice were pressed
further and asked if the music had any influence on
them. They responded no, making comments such as
"I have always liked light blue," or with beliefs such
as "beige is stylish" (eight people).
Discussion
The major aim of the present study was to take a product relevant to the subject sample (students purchase
and use pens) and to advertise it in a favorable or
unfavorable context simply by associating it with
liked or disliked music. The results supported the notion that the simple association between a product
(conditioned stimulus) and another stimulus such as
music (unconditioned stimulus) can affect product
preferences as measured by product choice.
While classical conditioning can parsimoniously
explain the results, the data could also be interpreted
within an information processing framework. While
only minimal product information was presented, the
music might have stimulated product-relevant thoughts.
It might have suggested potential attributes of the pen
or appropriate contexts in which it could be used. For
example, liked music with an upbeat sound might
stimulate the development of beliefs that a particular
color of a pen is a fun color or that it is appropriate
for an active lifestyle. These beliefs linking the pen
to the music might then influence product choice.
However, there were very few belief type comments
that were elicited when subjects did in fact give reasons for their choice. Taken together with the fact that
only minimal product information was presented,
classical conditioning would seem to be at least as
plausible an explanation of the results as information'
processing.
When a reason was given for choice, it was primarily that the pen of a particular color was preferred.
Effects of Music in Advertising / 97
Very few subjects pointed out that the music had an
impact on their choice. Zajonc (1980) notes that even
when questioned by others, people may have difficulty verbalizing reasons for feelings or describing
them. Instead, they may utilize more rational and
more easily verbalized cognitions (e.g., product specific information, or general statements of attitude
like "beige is my favorite color") when justifying a
product preference or purchase to themselves and especially to others. This would be particularly true if
people are not aware of the forces that influence their
behavior, which may be true in some cases (Nisbett
and Wilson 1977).
The verbal reports were obtained with a free response format. This format was chosen and the questions presented in a matter of fact way, to elicit salient
reasons for choice without encouraging the subject to
engage in any justification of choice to both him/
herself or to us. A more formal measure of beliefs
regarding the colors of the pens chosen and not chosen could be incorporated in future research. However, even if beUefs consistent with choice are obtained, the causal relationship between beliefs and
choice might remain unclear. Are the beliefs influencing choice, or to justify behavior, is the choice
influencing the formation of beliefs?
Had time permitted in the present study, post hoc
verbal reports of message evoked thoughts might have
shed light on the extent and nature of cognitive activity during exposure. Message evoked thoughts related
to the product would have favored an informational
rather than conditioning interpretation. It is interesting
to note that in the post project discussion with 20 subjects (10 per class), most said that they were thinking
of very little when listening to the music. The six
people that did recall something specific, recalled
pleasant or unpleasant situations from their past.
Exposure
The results of the present study do not support an
interpretation that mere exposure leads to liking.
Those who heard disliked music avoided the color of
the pen they were exposed to. Zajonc (1968) has
pointed out that in many situations, exposure is confounded with a number of other variables (in the case
of this experiment, liked or disliked music) that may
be more crucial in attitude formation.
While there were no exposure effects in this study,
feelings play as important a role in exposure theory
as in a classical conditioning theory of communication
effects. Zajonc (1980) notes that people tend to develop a positive feeling toward objects they have seen
before even if they cannot recall prior exposure.
While it may be true that there are reasons for these
feelings, these reasons may come later and perhaps
only when questioned by others. Zajonc (1980) stresses
98 / Journal of Marketing, Winter 1982
the primacy of affect and presents a viewpoint consistent with a perspective that people may not always
be actively processing information and evaluating situations.
Kassarjian (1978, 1981) and Olshavsky and Granbois (1979) have suggested that there are situations
where information search and evaluation are not relevant to purchase behavior. Probably there are also
many communication situations where the individual
is not really searching for or evaluating information.
A second experiment was conducted to examine the
importance of product infomiation relative to the
background features of a commercial, in two different
communication situations.
Experiment Two
Rationale and Hypothesis
We are often exposed to a commercial when we are
not thinking of even potentially buying the advertised
product. We are not in a decision making mode and
are not likely to be seeking information from any
source. In such situations, the commercial's impact
may often be more related to stimuli that can arouse
emotion, such as music and colors, than to product
information. A recent study suggests that in fact, very
little product information is contained in most American and Canadian commercials (Pollay, Zaichkowsky, and Fryer 1980).
An information processing explanation of post-exposure attitudes and behavior might be more appropriate when the person at the time of exposure to the
commercial is thinking about making a purchase in
the relevant product category. For example, a buyer
may see a commercial for car X while thinking of
buying a new car. In such situations the buyer might
be regarded as being in a decision making framework
and, therefore, perhaps very interested in the information that commercial might contain about car X.
The causal impact of such information on cognitive
structure, and in tum, its effects on attitudes and behavioral intentions have been demonstrated in carefully controlled research (e.g., Lutz 1977).
Product information should be most important
where the decision making context is salient at the
time of exposure to a commercial. However, the unconditioned stimulus or background features could he
more important than the product information where
exposure is a nondecision making context. The present study was conducted to test this hypothesis.
Sample
The sample consisted of 122 students randomly assigned during registration to two sections of an upper
level, undergraduate management course. Both classes
were taught in the middle part of the day and by the
same instructor. The experiment was conducted at the
beginning of the term so that different class experiences were less likely to be a significant factor.
Design and Procedure
As a cover story, subjects in the decision making condition (n=59) were told that an advertising agency
would like their help in determining whether or not
CO purchase advertising time in an upcoming major
network TV program. They were told that one of the
advertising agency's specializations was producing
commercials for companies that marketed pens. Two
pens, each manufactured by a different company,
were slated to be advertised on the program. For helping the agency evaluate the program they would later
be given a three pen packet of the company A or company B pen. Three pens were given rather than just
one because it was thought that information relevant
to a choice would be more influential if the decision
were made somewhat more important.
Subjects were then told that they would be given
an idea of the kinds of commercials planned for the
program. They were shown a slide of company A's
pen and told that the company was planning a musically-based ad to sell its pen. They then listened to
one minute of "liked" music (the "Grease" music
used in the first experiment) while they watched the
slide of a beige pen. Afterwards they were shown a
slide of a light blue pen and were told that company
B was planning to emphasize in its commercial that
the pen wrote very smoothly, that it never smudged,
and could last a long time even with regular use.^
After seeing the pen slides and viewing the program (entitled "Drugs and Teenagers"), subjects circled yes or no on their answer sheets as to whether
the ad agency should purchase time slots in the program. They were instructed that at the end of the class
(one hour and 10 minutes later), they should drop the
answer sheet in the box provided, and pick up their
pens. The time delay between exposure and choice
was included to try to mirror the real life situation
where people usually do not make their actual purchases until some time after exposure to a commercial. At the end of the class, the experimenter pointed
to two boxes in different locations where subjects
could pick up the packets of beige or light blue pens.
Subjects in the nondecision making condition (n=63)
followed exactly the same procedure but were not told
until the end of the class that they would get a threepen packet of the beige or light blue pens.
The results of experiment one suggested that beige and light blue
were both neutral colors for a pen. Therefore, it did not seem neeessary to incorporate color of pen as a variable in the second experiment.
A significant difference in choices between the
decision making context condition and the nondecision making context condition was hypothesized. It
was predicted that subjects in the former condition
would pick the light blue pen (the one advertised with
information), and subjects in the latter condition, the
beige pen (the one advertised with music).
Results
In the decision making condition, 42 out of the 59
(71%) subjects chose the light blue pen, advertised
with infonnation, with the remaining 17 (29%) choosing the beige pen, advertised with music. There was
a strong crossover in the nondecision making condition with 40 out of 63 (63%) choosing the beige pen
and the remaining 23 (37%) choosing the light blue
pen. As expected, there was a significant difference
in choices between the two conditions (decision vs.
nondecision making conditions: x\l) = 14.72, p <
.001).
Discussion
The results of this second experiment suggest that an
individual in a decision making mode when exposed
to a commercial is affected by the information it contains. In contrast, that information has less impact in
nondecision making situations. In such situations, the
classical conditioning of the advertised product through
its pairing with the unconditioned stimuli in the commercial appears to account for subsequent choice behavior.
Possibilities for future research include varying
the importance of the decision to be made and/or the
time lag between exposure and actual choice. One
could hypothesize that the importance of information
to the process of selection is a function of the importance of the decision. This should be particularly true
if the individual is in a decision making mode when
exposed to that information. In addition, as the time
lag between exposure and actual choice is increased,
the relative impact of information should be reduced,
particularly where the individual is not in a decision
making mode when exposed to the infonnation. In a
nondecision making mode, one might not be interested in product information. Therefore, even if such
infonnation is acquired and remembered for a short
while, with time it should be easily forgotten. Lengthening the time lag between exposure and choice could
also help determine the longevity of classically conditioned preferences.
Future research might explore the tentative findings of this experiment in a context where real commercials are utilized. However, real commercials
usually reflect the use of a number of techniques and
may not always be appropriate for theory testing. For
example, it might be very difficult to isolate an in-
Effects of Music in Advertising / 99
formation based commercial totally devoid of such
unconditioned stimuli as attractive colors or music.
Implications and Speculations
Measures of the effectiveness of commercials typically stress recall of the basic selling points of the
commercial. The impact of music and other background features is usually neglected (Honomichl
1981). A recent study by the Foote, Cone, and Belding ad agency found, however, that recall of good
"feeling" commercials, created through the skillful
use of music and visuals, was equal to that obtained
with good "thinking" commercials, created through
the rational presentation of product attributes (Hononoichl 1981). This paper further suggests that the
background features of commercials can influence
product choice. It is argued that the positive emotions
they generate become associated with the advertised
product through classical conditioning.
The actual choices people made in the nondecision
making conditions in these experiments would suppOTt a conditioning interpretation. To further test this
interpretation physiological recording could be used
in future research. The right hemisphere of the brain
is the nonverbal, musical, and intuitive side; the left
hemisphere is the analytical and verbal side (see Kassarjian 1981 for a summary of consumer research in
this area). The results of this study suggest that re-
cording of the activity in the two hemispheres during
exposure to musically based versus product information based commercials would yield more activity in
the right than left hemisphere with the former type of
commercial, and the reverse with the latter. Furthermore, activity in the rigbt hemisphere should also he
higher in nondecision making contexts where people
should not be seeking or analyzing product information from any source, with activity in the left hetnisphere higher in decision making situations.
The situation in which many commercials are
viewed may be characterized as nondecision making.
In watching TV we make decisions about, and are
interested in, programs, not commercials. The commercials we do see are often for brands in product
categories we may not be interested in for one reason
or another. We may have recently purchased in that
category or we may not be interested in the whole
product category in the first place. Even where purchase in a product category is contemplated we may
not be attentive to product information in a relevant
commercial because the product may be an unimportant one.
This suggests to the advertiser that an audience
may be largely comprised of uninvolved potential
consumers rather than cognitively active problem
solvers. Reaching them through emotionally arousing
background features may make the difference between their choosing and not choosing a brand.
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Operant and Classical Conditioning in Humans," in W. B.
Weiner and D. S. Palermo, eds., Cognition and Symbolic
Processes, Hillsdale, NJ: Erlbaum.
Carismith, J. J., P, C. Ellsworth, and E. Aronson (1976),
Methods of Research in Social Psychology, Reading, MA:
Addison-Wesley.
Engel, J. F., R. D. Blackwell, and D. J. Kollat (1978), Consumer Behavior, Hinsdale, IL: The Dryden Press.
Bricson, K. A., and H. A. Simon (1980), "Verbal Reports
as Data," Psychological Review, 87(3), 215-251.
Fishbein, M. and J. Ajzen (1975), Belief, Attitude, Intention,
and Behavior: An Introduction to Theory and Research,
Reading, MA; Addison-Wesley.
Greenwald, A. G. (1980), "The Totalitarian Ego: Fabrication
and Revision of Personal History," American Psychologist, 35(7), 603-618.
Honomichl, J. (1981), "FCB: Day-After Recall Cheats Emotion,'* Advertising Age, 52(no. 20), 2.
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Research, H. Keith Hunt, ed., 5, Ann Arbor, MI: Association for Consumer Research, 12-14.
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(1981), "Consumer Psychology," Working Paper
Series, Center for Marketing Studies, U.C.L.A., Paper No.
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Consumer Research, 5 (March), 240-250.
Krugman, H. E. (1965), "The Impact of Television Advertising: Learning Without Involvement," Public Opinion
Quarterly, 29 (Autumn), 349-56.
Lutz, R. (1977), "An Experimental Investigation of Causal
Relations Among Cognitions Affected and Behavioral Intention," Journal of Consumer Research, 3 (March),
197-208.
Nisbett, R. E. and J. D. Wilson (1977), "Telling More Than
We Know: Verbal Reports on Mental E*rocesses," Psychological Review, 84 (3), 231-259.
Olshavsky, R. W. and D. H. Granbois (1979), "Consumer
Decision Making, Fact or Fiction?" Journal ofConsumT
Research, 6 (September), 93-100.
Pollay, R. W., J. Zaichkowsky. and C. Fryer (1980), "Regulation Hasn't Changed TV Ads Much!" Journalism
Quarterly, 57 (3), 438-446.
Schiffman, L. G. and L. L. Kanuk (1978), Consumer Behas-
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Weitz, B. and P. Wright (1979), "Retrospective Self-Insight
on Factors Considered in Product Evaluations," yoMrna/ of
Consumer Research, 6 (December), 280-294.
Zajonc, R. B. (1968), "Attitudinal Effects of Mere Exposure," Journal of Personality and Social Psychology Monograph Supplement, 9, Part 2, 1-27.
(1980), "Feeling and Thinking: Preferences Need
to Inferences," American Psychologist, 35, 151-175.
Zanna, M, P., C. A. Kiesler, and P. A. Pilkonis (1970),
"Positive and Negative Attitudinal Affect Established by
Classical Condkioaing,"' Journal of Personality and Social
Psychology, 14 (no. 4), 321-326.
FACE
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Effects of Music in Advertising / 101
James M. Ferguson
Comments on
'The Inripact of
Advertising on
the Price of
Consumer
Products"
In their survey on whether advertising increases
prices, Farris and Aibion fail to understand that
those who argue that advertising increases prices
lack both theory and facts. Consumers benefit
from advertising because advertising lowers the
costs of information about brand qualities and reduces the average price per unit of quality. They
aiso fail to recognize that Steiner's dual stage
model is inconsistent with the theory of derived
demand.
(Farris and Albion, JM,
Summer 1980)
I
applaud the author's efforts to present theoretical
work from the industrial organization area of economics to readers of a marketing joumai. The authors
focus on the effects of advertising on price elasticity
of demand and on price levels.' Unfortunately, in
their survey of the empirical studies on whether advertising increases prices, Farris and Albion fail to
understand that those that argue that advertising increases prices lack both theory and facts. Also, their
discussion of the role of advertising in the process of
consumer choice is seriously incomplete.
The answer to the question. Does advertising
increase prices?, is no. Those who argue the opposite lack understanding of economic theory and have
not clearly recognized the difference between
money price and real price, including search costs
and alteration costs.^ Fundamentally, advertising
cannot increase prices even though it involves the
For a summary of the industrial organization literature on the
competitive effects of advertising, see Ferguson 1974.
^By alteration costs I mean costs incurred after purchase to adjust
the product to match the different tastes of various consumers
better. Altering clothing to match different shapes is one example.
James M. Ferguson is an Associate Professor at the Graduate School
of Management, University of Rochester.
102 / Journal of Marketing, Winter 1982
use of real resources. The argument is elegant and
simple. Advertising cannot increase the cost per
unit of quality^ to consumers because if it did,
consumers would not continue to respond positively
to advertising. Consumers benefit from the introduction of advertising because advertising lowers
the costs of information about brand qualities, leads
to increases in brand quality, and leads to a lower
average price per unit of quality, including sampling
and alteration costs.
This does not mean there is no deceptive advertising. The question is whether consumers are better
off when products are advertised or when they are
not advertised. Information is not a free good. I
argue that the cost to consumers of choosing products by using alternative sources of informatioa
in the absence of advertising exceeds the costs of
using advertising. The comparison is between two
alternative institutional arrangements, neither of
which is perfect.
The authors summarize what they describe as
two models or theories of the effects of advertising.
Advertising leads to market power, and Advertising
provides information. Unfortunately, they are un-
^The measurement of quality in terms of product characteristics
and the hedonic price function is discussed later in this article.
Journal of Marketing
Vol. 46 (Winter 1982), 102-10*
critical of the Advertising leads to monopoly power
approach. The fundamental difference between the
two views is the presence of economic theory in
the information view and its absence in the monopoly approach. The hypothesis that advertising
creates or increases market power assumes that
advertising changes tastes, makes demand less elastic, and creates durable brand loyalties. This assumption cannot be tested. The advertising-is-information view does not assume that advertising
increases sales because advertised brands are better
buys but explains that consumers will respond to
advertising only if they are made better off by doing
so. Consumer demand for advertising messages is
explained in terms of utility maximization. The
advertising industry, like every other industry, must
supply output that consumers want in order to
survive. The amount of advertising is controlled
by the same forces of demand and supply that
operate in other industries.
The authors also summarize empirical evidence
of the effects of advertising on price sensitivity
of demand. They conclude that both views of
advertising have some empirical support—some
studies find advertising increases price sensitivity,
while others find advertising decreases price sensitivity. Yet the authors recognize that "a correlation
between advertising and price insensitivity is not
enough to infer that advertising causes price inelasticity" (Farris and Albion 1980, p. 2G-21). In addition, the authors correctly note that none of the
studies controls for advertising content. The authors
properly might have concluded that none of the
studies presents an appropriate test of the effects
of advertising on price elasticity of demand. They
do not, however, because they want to accept two
other results of these empirical studies. Studies of
retail advertising find that advertising increases
consumer price sensitivity. Studies of manufacturer
advertising find that advertising decreases factory
price sensitivity. The authors claim that these different results are predicted by Steiner's analysis
(1978) of the role of retailers as intermediaries
between manufacturers and consumers.
The authors argue that the Steiner dual-stage
model "is the only theoretical framework for analyzing the impact of manufacturer advertising" on
the level of consumer prices (p. 32). They argue
that the core of Steiner's model is the fact that
retailers and manufacturers face different demand
functions, both of which must be examined to
understand consumer price levels. According to
Steiner, traditional economic theory underestimates
the incentives of producers to advertise and
overestimates the effects of such advertising on
pnces, because traditional theory does not recognize
tne effects of producers' advertising in increasing
the number of retail outlets handling producers'
brands and in increasing dealer support of advertised
products. As a result of this greater competition
at the retail level, retailer gross margins will fall
and thus allow factory prices to increase more than
consumer prices (or allow factory prices to increase
while retail prices fall). Thus, Steiner's basic proposition is that there is an inverse relationship between
producer advertising intensity and retailer gross
margins.
Because this postulated scenario is inconsistent
with the economic theory of derived demand, I
argue that it is incorrect." Stated simply, the theory
of derived demand says that the more elastic the
demand facing retailers, the more elastic will be
the retailers' demands for the manufacturers'
brands. Retailers' demands for the producers' goods
are derived from consumer demand for these goods
at retail outlets. In general, the more elastic this
demand at the retail level, the more elastic will
be retailers' derived demands for producers' products. Thus, the margins and prices at the retail and
producer levels should be positively related, not
inversely related, as postulated by the Steiner analysis. For example, suppose that producers' products and retailers' inputs are combined in fixed
proportions to make the final package that is purchased by consumers. In this case the retailers'
supply curve is equal to the vertical sum of the
supply curve of producers' products and the supply
curve of retailers' inputs. Retailers' derived demand
as seen by producers is simply tbe vertical difference
between consumer demand as seen by retailers and
the supply price of retailers' inputs as shown in
Figure 1. Thus, if producers' advertising increased
consumer demand (and made it less elastic), the
producers would also see retailers' derived demands
increase (and become less elastic).
In addition to the faulty theoretical discussion,
there is the empirical issue of the role that producers'
advertising directed at consumers plays in increasing
retail distribution. Farris and Albion cite three
studies that allegedly provide strong empirical
support for Steiner's view of the positive effect
of producers' advertising on retail distribution.
However, they are incorrect with respect to their
first-cited study hy Haines and Silk (1967), who
state, 'There is no evidence that advertising aimed
at consumers affects the availability of the product
in retail markets. . . ." (pp. 13-14) The Parsons
study (1974) does show producer advertising increases the fraction of retail stores handling a
product. The Nuttall study (1965) does not include
producer advertising as a variable.
a discussion of derived demand, see Friedman (1976).
Comments on 'The Impact of Advertising on Price of Consumer Products" / 103