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The authors review more than 250 journal articles and books to establish what is and should be known about how advertising affects the consumer-how it works. They first deduce a taxonomy of models, discuss the theoretical principles of each class of models, and summarize their empirical findings. They then synthesize five generalizations about how advertising works and propose directions for further research. Advertising effects are classified into intermediate effects, for example, on consumer beliefs and attitudes, and behavioral effects, which relate to purchasing behavior, for example, on brand choice. The generalizations suggest that there is little support for any hierarchy, in the sense of temporal sequence, of effects. The authors propose that advertising effects should be studied in a space, with affect, cognition, and experience as the three dimensions. Advertising's positioning in this space should be determined by context, which reflects advertising's goal diversity, product category, competition, other aspects of mix, stage of product life cycle, and target market.

Prior work in marketing has suggested that advertising —levels beneath which there is essentially no sales response—are rarely encountered in practice. Because advertising policies settle into effective ranges through early trial and error, thresholds cannot be observed directly, and arguments for their existence must be based primarily on a "statistical footprint," that is, on relative fits of a range of model types. To detect possible threshold effects, we formulate a switching regression model with two "regimes," in only one of which advertising is effective. Mediating the switch between the two regimes is a logistic function of category-specific dynamic variables (e.g., order of entry, time in market, number of competitors) and advertising levels, nesting a variety of alternative formulations, among them both standard concave and S-shaped responses. A sequence of comparisons among parametrically related models strongly suggests: that threshold effects exist; that market share response to advertising is not necessarily globally concave; that superior fit cannot be attributed to model flexibility alone; and that dynamic, environmental, competitive, and brand-specific factors can influence advertising effectiveness. These effects are evident in two evolving durables categories (SUVs and minivans), although not in the one mature, nondurable category (liquid detergent) studied.advertising, econometric models, product management, switching regression, dynamic models

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The authors examine the dynamic effects of category- and brand-level advertising for a new pharmaceutical in a market in which regulations require that the content of these two types of advertising be mutually exclusive. Specifically, category, or generic, messages should communicate information only about the disease without promoting any brand, whereas brand-level messages should be void of any therapeutic information. This brings up two questions of great managerial importance: Which type of message is generally more effective (category or brand level), and when is one type more effective than the other? The authors pursue these questions by analyzing the effects of advertising on new and refill prescriptions through the use of an augmented Kalman filter with continuous state and discrete observations. The findings suggest the presence of complex dynamics for both types of regulation-induced advertising messages. In general, brand advertising is more effective, especially after competitive entry. Extensive validation tests confirm the superiority of the modeling approach. The authors discuss implications for managers and regulators.