Alvin J. Silk

On the Reliability and Predictive Validity of Purchase Intention Measures

This paper reports some further analyses and applications of Morrisons model of the predictive relationship between measures of intentions and subsequent purchasing behavior. A review of published studies bearing on the threats to predictive validity of intention scales represented in Morrisons model is presented. Findings from a test-retest study of intention ratings for concept stimuli are shown to be consistent with the levels of reliability expected under the models assumptions of beta binomial distributed scores. Evidence of the predictive validity of intention measures is found in a re-analysis of several sets of relevant data but a different form of predictive relationship is shown to hold for generic durable goods as compared to branded packaged goods. Whereas a linear relationship is supported in the case of durable goods, the presence of a threshold phenomenon in the branded packaged goods data suggests the use of a piecewise linear model. There is reason to believe that the nature and sources of systematic error present in intentions ratings are different for these two types of purchases.

The Emerging Position of the Internet as an Advertising Medium

This paper examines the emerging position of the Internet as an advertising medium. The nature and time path of its evolution is subject to considerable uncertainty arising from issues relating to expansion of the Internets penetration of households; consumer demand for information; development of pricing policies and measurement capabilities; and its attractiveness to advertisers in different product/service categories. Our analyses of these issues suggest that its long-term impact on intermedia rivalry will be broad and substantial. The Internet is emerging as an adaptive, hybrid medium with respect to the factors hypothesized to affect intermedia substitutability, namely, audience addressability, audience control, and contractual flexibility. Possessing such capabilities, it looms as a potential substitute or complement for all of the major categories of existing media and appears capable of serving a wide range of communications objectives for a broad array of advertisers.

The Development, Testing, and Execution of a New Marketing Strategy at AT&T Long Lines

AT&T has developed a new marketing strategy for its residence long distance marketplace, the result of five years of research starting with overall market segmentation, continuing with concept testing, and culminating with a large scale field experiment testing the new ad campaign. This experiment demonstrated, with a unique level of precision, that (1) the ad copy changed purchase behavior and, (2) that AT&T should generate an additional

The Internalization of Advertising Services: An Inter-Industry Analysis

100 million by implementing the new campaign.

Scale and Scope Economies in the Global Advertising and Marketing Services Business

This study investigates the extent to which U.S. advertisers use in-house rather than independent advertising agencies and examines inter-industry variation in such internalization. Contrary to the widely-held impression that use of an in-house advertising agency is more the exception than the rule, we find that vertical integration of advertising services is much more widespread than has hitherto been appreciated. Drawing on concepts from research on scale economies and transaction costs, we develop a set of hypotheses about differences in the expected depth of internalization across industries. We test these hypotheses in cross sectional analyses of data covering 69 two digit SIC industries at two points in time, 1991 and 1999. In both years, approximately half of advertisers of all sizes operated an in-house agency. Across industries, we find that the likelihood of internalization of at least some advertising services decreases as the size of advertising outlays increase but increases as advertising intensity and technological intensity increase and is greater for “creative” industries.

How Concentrated is the U.S. Advertising and Marketing Services Industry? Myth Versus Reality

We assess size and scope-related economies in the global advertising and marketing services business. A translog cost function is employed wherein a firms costs vary according to its scale and two dimensions of the scope of its operations. Parameters of the model are estimated via three stage least squares using annual data for 1989-2001 for an unbalanced panel consisting of the eight largest firms in this industry. A firms total variable costs are affected by its scale, scope (mix of services and markets served), and by the interaction of the two dimensions of scope. The latter effect suggests that economies of coordination may accompany the strategy of jointly offering advertising and marketing services globally. Estimates indicate that the industrys long-run cost function is subject to very slight economies of scale. Diseconomies of scale accompany growth in volume obtained by extending either breadth of service offerings or market coverage. A small cost advantage, typically of one to two percent, is uniformly associated with joint production of services for the domestic and overseas markets, as compared to splitting up the firm into smaller stand-alone entities. Scope economies of a similar magnitude arise consistently from the joint production of advertising and marketing services.

The Unbundling of Advertising Agency Services: An Economic Analysis

We analyze changes in concentration levels in the U.S. advertising and marketing services industry using data from the U.S. Census Bureaus quinquennial Economic Census and the Service Annual Survey. These data, heretofore largely ignored, allow us to redress some of the measurement problems surrounding estimates found in the existing literature. Firm level concentration, as measured by the Herfindahl–Hirschman Index (HHI), varies across the sectors comprising the industry, but all are within the range generally considered as indicative of a competitive industry. The data available allowed HHI to be calculated for the period 1977–2002 in the case of advertising agencies and for 1997 and 2002 for the other industry sectors. At the holding company level, the four largest organizations account for only about a quarter of the industrys total revenue, a share that changed little over the period 2002–2008, but one that is approximately half of estimates frequently cited in the trade press. The persistence of a diverse and relatively unconcentrated size structure appears quite consistent with other research on the underlying economics of this industry.

Concentration Levels in the U.S. Advertising and Marketing Services Industry: Myth vs. Reality

Abstract We address a puzzle surrounding the shift from bundling to unbundling of U.S. advertising agency services and the slow pace of change over several decades. We model an agency’s decision as a tradeoff between the fixed cost to the advertiser of establishing a relationship with an agency and pecuniary economies of scale from media services provision. Using micro-data from the U.S. Census of Services for 1982-2007, we find agencies are more likely to unbundle with increasing size, diversification and higher media prices, and less likely with increasing age, larger media volume, and an interaction between media prices and volume.

Conflict Policy and Advertising Agency–Client Relations: The Problem of Competing Clients Sharing a Common Agency

We analyze changes in concentration levels in the U.S. Advertising and Marketing Services industry using data from the U.S. Census Bureau’s quinquennial Economic Census and the Service Annual Survey. Heretofore largely ignored, these data allow us to redress some of the measurement problems surrounding estimates found in the existing literature Firm level concentration as measured by the Herfindahl-Hirschman Index varies across the sectors comprising the industry, but all are within the range generally considered as indicative of a competitive industry. At the holding company level, the four largest organizations account for about a quarter of the industry’s total revenue, a share lower by an order of magnitude than that frequently cited in the trade press.

Pre-test market evaluation of new packaged goods: a model and measurement methodology

What restrictions should be placed on advertising agencies with respect to serving accounts or clients who are competitors of one another in order to avoid conflicts of interest? In recent decades, the advertising and marketing services industry has undergone a number of structural changes that forced an ongoing re-examination and modification of traditional norms and policies emphasizing exclusivity in agency–client relationships. A typology of conflicts that have arisen in the U.S. shows the variety and complexity of contemporary conflicts. Cases of conflicts reported in the trade literature are used to illustrate policy issues as well as the spillover effects and resolution of disputes.