Category- versus Brand-Level Advertising Messages in a Highly Regulated Environment

Abstract

The authors examine the dynamic effects of category- and brand-level advertising for a new pharmaceutical in a market in which regulations require that the content of these two types of advertising be mutually exclusive. Specifically, category, or generic, messages should communicate information only about the disease without promoting any brand, whereas brand-level messages should be void of any therapeutic information. This brings up two questions of great managerial importance: Which type of message is generally more effective (category or brand level), and when is one type more effective than the other? The authors pursue these questions by analyzing the effects of advertising on new and refill prescriptions through the use of an augmented Kalman filter with continuous state and discrete observations. The findings suggest the presence of complex dynamics for both types of regulation-induced advertising messages. In general, brand advertising is more effective, especially after competitive entry. Extensive validation tests confirm the superiority of the modeling approach. The authors discuss implications for managers and regulators.