Jooseop Lim and Tieshan Li (Concordia University, Montreal) focused on the motion-picture industry in addressing this issue, as advertising in this sector spans pre-release and post-release phases in movie theatres, before films are then marketed for at-home viewing.
“Products are distributed through sequential stages,” they wrote, “whether in the same or different versions. A movie is released in the movie theater first, followed by home-video channels for rental and purchase,” they reported.
“As the sequential-release strategy becomes more popular, the allocation of an advertising budget across product life stages or product formats over time has become a critical issue in improving the overall performance of a company.”
Gatorade, PepsiCo’s sports drink, used a similar strategy by targeting athletes before its introduction into mass retail. Camera brands, too, often release products to professionals in advance of selling them to the general public.
Marketing managers, the study asserted, frequently adopt a sequential product-release strategy when a strong cannibalization effect or “positive network externality” – such as widespread consumer buzz – is expected.
“Although product release through sequential stages has become more common, relatively little is known about advertising-budget allocation rules for sequentially released products,” the authors argued.
Whatever the nature of the product or service, The Optimal Advertising-Allocation Rules for Sequentially Released Products reported that, in all cases, marketing stewards need to consider a range of factors.
These include the potential level of cannibalization, the “signaling” role of advertising between sequential stages, and the carryover effect of advertising from previous phases.
Also important is the capability of the first product in building the “network externality”, as exemplified by the “effectiveness of consumer-generated marketing that may be built from the initial advertising”.
In quantifying the prospective payback from this approach, a simulation found that predicted revenues following optimal budget allocation rules would outperform actual revenue figures for 74% of the movie titles assessed.
Sourced from Journal of Advertising Research