Economics of Television Advertising

This research reviews the economics of television advertising. Cost-effectiveness is a focus of this review.

In 1992, one of the country's largest television advertisers, Proctor & Gamble, shocked the major television networks when the company canceled $15 million in television commercial advertising spending in the spring of that year. Proctor & Gamble concluded that its television advertising was not cost-effective; however, the reasons were not all based on the cost of the television commercials. A major factor involved in the problem was that the company had miscalculated the television advertising strategy of its competitors (Brunelli & Schmuckler, 1992, p. 4). One observer in the television industry said of Proctor & Gamble: "Their financial people dictate to their marketing people. And it usually depends on what the financial people feel the competition will do. They're usually right, but this move indicates they didn't do their homework as well as usual" (Quoted in (Brunelli & Schmuckler, 1992, p. 4). Effectively, what Proctor & Gamble learned was that, while the company had increased spending for television substantially, the company's competitors had not made similar increases. Therefore, Proctor & Gamble was spending substantially more for television advertising that was true of the competition, and this relationship caused the cost-effectiveness of the company's television commercials to deteriorate.

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ntexts is argued to increase the number of routes to memory of the repeated item, which increases the probability of overlap between the information in a retrieval cue and that encoded in memory. The most sophisticated and popular explanation of this phenomenon is "via encoding variability theory (EVT). The underlying logic of EVT is the same as that of the encoding specificity hypothesis. Both theories recognize that when an item (stimulus) is presented to a subject, the representation of the item in memory depends on the contextual variables present at the time of encoding. In other words, the same physical stimulus (nominal stimulus) item may be represented or encoded differently (functional stimulus) if it is presented in a different context. Furthermore, both assume that recall depends on the correspondence between the two functional stimuli, (1) the functional stimulus at encoding, which is a function of the nominal (physical) stimulus plus the encoding context, and (2) the functional stimulus at the time of testing, which depends on the nominal retrieval cue and the testing context. The greater the correspondence between the two functional stimuli, the better the chance of recall. EVT differs from the encoding specifi
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Approximate Word count = 2494
Approximate Pages = 10 (250 words per page)

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