Retailer and Manufacturer Advertising Scheduling in a Marketing Channel

Abstract

Despite the fact that the use of sporadic advertising schedules is well established in both the advertising literature and market place, the marketing channel literature that focuses on vertical interactions has consistently prescribed continuous advertising strategies over time. This paper investigates, in a bilateral monopoly context a situation in which a manufacturer and a retailer control their pricing and advertising decisions, the optimal scheduling of advertising in a planning horizon of three periods. We found that, consistent with the advertising literature, the integrated channel adopts pulsing to benefit from advertising positive carryover effects. Conversely, when pricing and advertising decisions are uncoordinated, channel members can optimally implement each of the following three advertising schedules. The full continuous schedule where channel members advertise in the three periods. %The full pulsing schedule in which the two channel members advertise only in the first and third periods. The mix schedule where the retailer advertises in the three periods and the manufacturer advertises exclusively in the first and third periods. Depending on the magnitude of the long-term effects of retailer and manufacturer advertising, each of the three schedules can be implemented.