Working Papers

The Effects of Publicity on Demand: The Case of Anti-cholesterol Drugs

Andrew T. Ching, Robert Clark, Ignatius Horstmann, Hyunwoo Lim

Over the past ten years there has been increased recognition of the importance of publicity as a means of generating product awareness. Despite this, previous research has seldom investigated the impact of publicity on demand. We contribute to the literature by (i) proposing a new method for the interpretation of publicity data, one that maps the information in news articles (or broadcasts) to a multi-dimensional attribute space; (ii) investigating how different types of publicity affect demand; and (iii) investigating how different types of publicity interact with firms? own marketing communication efforts. We study these issues for statins. We find that publicity plays an important role both for expanding the market for statins and for determining which statins patients/physicians choose. We also find evidence that publicity can serve as either a substitute or a complement for traditional marketing channels depending on the complexity of the information type. We argue that the interaction results are driven by the relative strengths of the corroborative and rational inattention functions in publicity. These results suggest that managers should be aware of the interactions between publicity and traditional marketing channels in order to better determine how to allocate their marketing expenditures.

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Paper Keywords

publicity, informative detailing and advertising, information complements and substitutes, corroborative evidence, rational inattention, demand, prescription drugs