Reports

Non-Informational Advertising Informing Consumers: How Advertising Affects Consumers’ Decision-Making in the U.S. Auto Insurance Industry

Yi-Lin Tsai, University of Delaware, and Elisabeth Honka, UCLA, 2019, 19-128

Whether, how, and how much consumers are influenced by advertising are crucial questions for marketing managers who spend millions and, in some cases, billions of dollars on this communication method.

Yi-Lin Tsai and Elisabeth Honka investigate the relationship between both advertising content and quantity and several stages of consumers’ decision-making, namely, unaided and aided awareness, search (consideration), and purchase. They address three main questions:

  • Which stage(s) of consumers’ decision-making is (are) affected by advertising?
  • Which type of advertising content affects consumers (potentially at which stage)?
  • To what extent do the effects of advertising differ across groups of consumers, for example, first-time buyers or vulnerable consumers?

Their unique individual-level data contain information on purchases, consideration and awareness sets, demographic variables, and perceived prices for consumers between 2008 and 2016. They supplement these data with data on advertising quantities for all and advertising content for the main three media channels (TV, internet, and magazines).

Findings

Their results reveal that advertising quantity significantly increases consumer (unaided and aided) awareness, but has no effect on conditional consideration and conditional choice - a finding consistent with the informative role of advertising. Interestingly, the advertising content that leads to consumers’ increased awareness is non-informational, implying that the effect on awareness is coming from non-informational content leading to better brand recall. Lastly, their results indicate that vulnerable consumers and first-time buyers are similarly affected by advertising as the remainder of the population.

Understanding how the amount and content of advertisements affect consumers’ decision-making is crucial for companies to effectively and efficiently use their advertising budgets. These results indicate that (non-informational) advertising is most effective in increasing consumer brand awareness.

Yi-Lin Tsai is Assistant Professor of Marketing, Lerner College of Business and Economics, University of Delaware. Elisabeth Honka is Assistant Professor of Marketing, Anderson School of Management, UCLA.

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