Due to the important role of advertising in marketing practice, its effects have been the re-search focus all the time. Among relevant rere-search fields, the issue that has been paid close attention in the economic field is its impact on consumer welfare. It has been asserted that the informative advertising provides information, promotes competition, and thus increases consumer welfare; on the contrary, the persuasive advertising alters consumer preference, in-creases perceived product differentiation which is not real sometimes, alleviates competition, and thus decreases consumer welfare. On the stance of firms, they care their own profits more than consumer welfare. They would try their best to avoid competition. Therefore, researchers (Dixit and Norman 1978, Stegeman 1991, Stahl 1994) claim that the informative advertising is always too less but the persuasive one is always too much. Issues focused in the marketing field are its impacts on consumer perception, feelings, attitudes, behaviors, and competitive interaction among firms. However, in these two fields the integrated channel is the focused scenario where the advertising works in vast majority of literatures. Only very few of them investigate effects of advertising in other channel structure context, not to men-tion to compare the working differentials of advertising across different channel structures.
However, in practice indirect channels are very common. There are various forms of indi-rect channel structures, e.g., dedicated retailer channel, monopoly common retailer channel, duopoly common retailer channel, hybrid channel, etc. Manufactures would act in different patterns across channel structures because one channel structure constructs a specific degree of competition. Since advertising is an important strategic instrument, it deserves to pay more efforts to relate the advertising and channel structure.
The dissertation would target three issues relating the advertising and channel struc-tures. The first issue focuses on discussing the differential of choices between informative and persuasive advertising across three channel structure contexts for two competing man-ufacturers. The second issue is about the proposition that intermediaries may reduce price competition among manufacturers, which increases their profits, and thus manufacturers prefer indirect dedicated retailers to direct channels when competition is intense. We exam-ine whether it is also valid when we consider both price and advertising competition between two manufacturers with loyal consumers. The third issue is about the profit of individual
channel member in the common retailer system impacted by the persuasive advertising. We check whether it is possible to find out certain conditions where the persuasive advertising may not harm any channel member.
By discussing on the first issue, we can understand whether the probability of observ-ing informative advertisobserv-ing in equilibrium is all the same across three channel structures, the integrated channel structure, the dedicated retailer structure, and the common retailer structure. Is it possible that manufacturers would adopt informative advertising rather than persuasive one more probably in a certain channel structure? What are the conditions? And is it likely that on certain conditions manufacturers would adopt informative advertising in one channel structure but otherwise in another channel structure? By identifying operating conditions under which one form of advertising strategy is more favorable than the other in each specific channel structure, we can thereby provide a handy guideline for practitioners to design their advertising strategically.
The second issue discusses the validity of the proposition that dedicated intermediaries can mitigate price competition between manufacturers. Is it possible that manufacturers with integrated channel structures can be better off than those with dedicated retailers although dedicated retailers can work as buffers between manufacturers when their products are less differentiated? What will happen to these two channel systems if we introduce both price and advertising competition with loyal consumers? This would give us more insight into the choice of channel structure because the multi-competition dimensions and the privilege of loyal consumers are very common in practices.
Finally the dissertation switches the focus from integrated channel systems and dedi-cated retailer systems to the common retailer system in the third issue. Trying to explore impacts of the persuasive advertising on channel members in an alternative way, I would like to find out conditions in which persuasive advertising that decreases the manufacturer’s product substitutability can relax its combative nature and lead to no channel conflict with-out the advertising manufacturer’s suffering losing profit.
The dissertation academically contributes to first explore two primary effects of adver-tising across channel structures. It let us look into the differential working of adveradver-tising across channel structures more delicately. This would advise us that researchers should
be more careful when they draw conclusions about advertising from a specific distribution channel. We may no longer regard the advertising competition as the same across different channel structures. Under the same inherent product differentiation, persuasive advertising may be prevalent in certain channel structure, while informative one may be prevalent in other channel structure. Additionally, after incorporating advertising effects into price com-petition, the dissertation discloses conditions where the integrated channel structure is more beneficial than the dedicated channel structure. This would complement the claim that each manufacturer will distribute its product through dedicated channel for highly competitive goods. Furthermore, the dissertation also contributes to propose remedies for the weak-ness in Shaffer and Zettelmeyer (2004a). They find conditions where channel conflict in the common retailer channel need not arise. However, all channel members get worse due to a manufacturer’s persuasive advertising under such conditions. For marketing managers, they can have a clearer picture about advertising competition across different channel structures and may not miss to engage in an inappropriate advertising campaign given their channel structure contexts.