Coordinating traditional media advertising and online advertising in brand marketing

Abstract

AbstractResearchers in the marketing and operations management literature have investigated the issue of making optimal media planning decisions for advertising. Brand marketers have recently begun using online intent advertising (OIA), which is online advertising such as search or display advertising targeted at consumer intent, for brand building. Unlike traditional media advertising, OIA is sold through an auction of indicators of consumer intent such as keyword phrases. This practice raises questions about how media planners should incorporate OIA in their decision making. We analyze this critical issue using a model of horizontally differentiated competing firms. Our analysis finds that traditional advertising spending strategically affects online ad bids in a way that is new to the literature. We find that even when traditional and OIA have similar benefits, a firm may optimally bid more for OIA per consumer reached than the maximum cost it would pay for reaching a consumer in a world with only traditional media. We also find that interestingly, a firm may be willing to pay more for traditional advertising when OIA is an option than when it is unavailable.