How competitor advertising can benefit your brand - RESEARCH WITHIN REACH APRIL 2021
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RESEARCH WITHIN REACH
How competitor
advertising can benefit
your brand
APRIL 2021
GLOBAL. BUSINESS. LEADERS.
2 | MELBOURNE BUSINESS SCHOOL | RESEARCH WITHIN REACH
The online revolution In ground-breaking research, Professor company, each brand has its own
Michael Smith and collaborators, identity and customer databases.
has created new Professors Peter Danaher and Tracey
Danaher and Dr Ruben Loaiza-Maya “We were able to access this rich data
sales and advertising from Monash University, have shown for 4000 individuals over two years,
when a positive spill-over effect can leading to millions of observations,
channels and occur and the most responsive market and compare the effect on each
individual from advertising for all
mountains of segments to the various advertising
three brands in three distinct media –
media.
data. It also can printed catalogues, emails and online
Their paper, entitled “Advertising paid searches.
allow marketers to Effectiveness for Multiple Retailer-
Brands in a Multimedia and Multichannel “Using recent developments in data
understand if and how Environment” and published this year science, we were able to quantify the
in the leading Journal of Marketing impact of different advertising media
retailers can benefit Research, meticulously tracks on not just the focal brand but also its
same-stable competitors, looking at
from competitor 4000 individuals over two years
different combinations of advertising
to gauge their responsiveness to
advertising. multiple advertising media, including exposure and its impact on instore
competitor advertisements, and the and online sales, while identifying
impact on sales. important customer segments in the
Over the past decade the online process.”
revolution has resulted in an ever- “What sets this study apart is that we
had data from a single company that The picture that emerged provides
growing trove of customer data for
owns three distinct but competing insights into how to navigate
retailers. Whether selling items online
apparel brands,” explains Professor advertising in an omni-channel world.
or through bricks and mortar, or
advertising using printed catalogues or Smith. “While managed by a parent
paid digital, retailers must make sense
of all this information to spend their
limited marketing budgets wisely.
Understanding the effects of
advertising in a multimedia Understanding the effects of
environment with multiple sales
channels is a complex challenge. Are advertising in a multimedia
there spill-over effects (cross-brand environment with multiple sales
advertising elasticities) that allow
one brand’s advertising to increase or channels is a complex challenge.
decrease the sales of another? Is digital
media only better than traditional
media for online sales? Is it better to
compete head on with the same type
of media?
RESEARCH WITHIN REACH | HOW COMPETITOR ADVERTISING CAN BENEFIT YOUR BRAND | 3
The effect of own-brand advertising
on instore and online sales Research by
The researchers found that all three sales,” says Professor Smith. “This is
media (catalogues, emails and paid good news because emails are almost
search) were effective, but how costless.”
effective depended on the purchase
channel. While catalogues were the most
effective at influencing instore sales,
Unsurprisingly, digital advertising was their high production costs led to a
the best way to influence online sales. very low return on investment (ROI) of
only 2 per cent. However, they can’t
“Emails and paid searches were found be automatically dismissed because
to be the most effective at boosting they were very effective in promoting
online sales, and emails were also Michael Smith
a focal brand and useful for defending
found to be quite effective for instore market share. @
mike.smith@mbs.edu
Michael Smith has held the Chair
of Management in Econometrics
The response of customer segments at MBS since 2007.
to multimedia advertising A leading researcher in Bayesian
statistics and business analytics,
Michael is a past recipient of
The research team identified a segment Less loyal customers who favoured an Alexander von Humboldt
which was the most attractive to multiple brands through frequent Fellowship and an Australian
retailers – heavier buyers who utilised online and instore purchasing were Research Council Future
both instore and online channels most susceptible to competitor emails. Fellowship.
and were responsive to all forms of
“The effect of competitor emails With a PhD from the Australian
advertising. This group contrasted
here was to reduce the sales of the Graduate School of Management
with light buyers who were the least
focal brand. This makes sense as the at the University of NSW,
responsive to advertising.
customer in this segment had no Michael has global experience
For highly prized heavy buyers, the overwhelming loyalty to any particular including visiting positions at
most effective advertising depended brand,” explains Professor Smith, Ludwig Maximillian University
on the number of brands favoured adding that, yet again, catalogues in Munich, the Wharton School at
by the buyer – and here the value of made the situation more interesting. the University of Pennsylvania,
catalogues stood out. the McCombs School of Business
“What we found was that catalogues at the University of Texas and
“Where you have a brand-loyal had two effects on this group. London Business School.
customer, that is, a customer who Catalogues for large brands reduced
preferred one brand over others, and the sales of other large brands, similar Combining his responsibilities
that customer uses both instore and to the effect of emails. as the MBS Associate Dean of
online purchase channels, catalogues Research, Michael currently
were very effective,” says Professor “Catalogues for smaller brands, teaches Data Analysis on the
Smith. however, can have the reverse effect. part-time MBA and Financial
They lifted online and instore sales for Analytics in the Master of
“In such cases, catalogues had a larger competing brands. A possible Business Analytics. He is a
healthy ROI of 97 per cent because reason is that the three brands in our past director of the Business
they also stimulate online searches study were often located close to each Administration and Analytics
and website visits for this segment. If other in a shopping centre, so visiting stream of the MBS doctoral
these pathways were ignored, the ROI a mall in response to a smaller brand’s program.
would drop to 20 per cent.” catalogue can stimulate additional
instore browsing for the larger brand.”
4 | MELBOURNE BUSINESS SCHOOL | RESEARCH WITHIN REACH
Multimedia advertising intensity and scheduling
As a general rule, marketers must take “Alternatively, at times, managers and email seems to be an ideal medium
into account the advertising schedule might wish to defend their brand’s for achieving this.”
of competitors when deciding on their sales at the expense of a competitor,
ad spend. The growing use of digital
and traditional media has made this
task more difficult.
“When a pair of brands advertise
intensively and simultaneously, “Brand managers can make
sales for both brands are increased,”
observes Professor Smith. “However,
further gains from their
there is evidence that brand managers advertising spend by scheduling
can make further gains from their
advertising spend by scheduling their
their ads away from competitors.”
ads away from competitors, especially
with catalogues.
p(θ,α|y) � p(y|θ,α) p(α |θ) π(θ) y*ibct = α’ibczibct + β’bc �ibct + εibct
Augmented Response Random Prior
Posterior Model Effects
L(ω) = Epζ (log �(a(ζ,ω)) – log �ω (a(ζ,ω)))
∂ψ ’
�ωL(ω) ≈ Epζ (�ψ log �(a(ζ,ω)) – �ψ log �ω (a(ζ,ω)))
∂ω
Application of findings
The research by Professor Smith and “I think we’ve shown that there can be it’s common for one company to hold
his colleagues rebuts any assumption strong positive spill-over effects using multiple brands,” says Professor Smith.
among marketing managers of very our data from three retail brands. It
little spill-over from cross-brand seems likely that this can also be the “Moreover, even in industries where
advertising. case in other circumstances, such as in multiple brands are not owned by the
the airline and hotel industries, where same parent company the principles
may well still hold.”
Skills marketing managers need today
Over the past decade, the global digital “There is the big data revolution, where is the data science revolution, where
advertising budget has surpassed companies are collecting enormous data scientists develop new ways to
traditional media. Professor Smith and datasets on their customers’ behaviour extract information and value out of
his colleagues’ findings will reassure at the individual level. And then there this data,” explains Professor Smith.
advertising managers who have
invested in digital channels at the
expense of traditional media.
However, their research also
“The big data and data science
demonstrates that with the growth revolution go hand-in-hand,
of customer databases, the task of a
marketer has become increasingly
and businesses must harness
complex. both to extract the most value.”
RESEARCH WITHIN REACH | HOW COMPETITOR ADVERTISING CAN BENEFIT YOUR BRAND | 5
Analytics and the future of
More information
business Research Within Reach is
a regular publication from
Melbourne Business School
Professor Smith’s contribution to be used for risk management in the
designed to explain the latest
his latest research paper is part of a electricity markets, the pricing of
research by our academic
larger research agenda that pushes the ancillary services for flight bookings,
faculty in easy-to-understand
frontier of data science. By taking the such as in-flight meals and seat
language. For more
big data that is available and applying selection, and the processing of
information, please contact:
complex algorithms, made possible by fMRI brain scans that produce 60
computing advances, data scientists million observations, which are used
can now solve problems that were for medical intervention. All these Bogaçhan Çelen
unimaginable before. things—and many more—are linked by Associate Dean, Faculty
data science correctly dissecting and @
b.celen@mbs.edu
“What this research shows is the processing datasets of ever-increasing
power of analytics to investigate size.
at an individual level the impact of Andrew Ramadge
interactions that businesses have with “Increasingly, businesses need to Media and Communications
customers. It allows you to better collect, maintain and harness their Director
segment your customers and interact customer data. This means extracting
@
a.ramadge@mbs.edu
with them in a more nuanced and value from it using analytics, not just
targeted way. reporting on it. Doing this correctly
will be a source of competitive
“I’ve been in this field for over two advantage that will help determine
decades, and the advances over that which businesses are successful in the
time have been extraordinary. I’ve future.”
worked on new algorithms that can6 | MELBOURNE BUSINESS SCHOOL | RESEARCH WITHIN REACH
Our faculty
Yalçın Akçay Simon Holcombe Mara Olekalns
Professor of Operations Management Academic Director, Masters of Professor of Management
Business Analytics (Negotiations)
Tomohiro Ando
Professor of Management Karen Jehn Don O’Sullivan
Professor of Management Professor of Marketing
Pat Auger
Associate Professor of Marketing Andrew John Jennifer Overbeck
Professor of Economics Associate Professor of Management
Caron Beaton-Wells
Deputy Dean Ujwal Kayande Onur Özgür
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Gerardo Berbeglia
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Professor of Marketing Senior Fellow, Accounting and
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Professor of Economics Brandon Lee
Associate Professor of Business Gary Sampson
Vivek Chaudhri Strategy Adjunct Professor of International
Associate Professor of Strategy Trade
Kwanghui Lim
Graeme Cocks Associate Professor of Strategic Kannan Sethuraman
Associate Professor of Operations Management Associate Professor of Operations
Management
Douglas Dow Chris Lloyd
Professor of Business Strategy Professor of Statistics Amanda Sinclair
Professorial Fellow
Jody Evans Pete Manasantivongs
Associate Professor of Marketing Senior Fellow Michael Smith
Chair of Management (Econometrics)
Sven Feldmann Worapree Maneesoonthorn
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Econometrics Associate Professor of Finance
David Frankel
Professor of Economics Geoff Martin Nam Tran
Professor of Strategy Academic Director, MBA Programs
James Frederickson
Professor of Accounting Nadia Massoud David Trende
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Deshani Ganegoda
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Behaviour Assistant Professor and Fellow, Principal Fellow
Centre for Business Analytics
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Dean Burak Oc Associate Professor of Finance
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