ASSOCIATION FOR CONSUMER RESEARCH Labovitz School of Business & Economics, University of Minnesota Duluth, 11 E. Superior Street, Suite 210, Duluth, MN 55802 The Gloves Are Coming Off! to Use Direct/Indirect Comparative Ads: Depends on the Comparison Strategy Arti D Kalro, Assistant Professor, Shailesh J Mehta School of Management, Indian Institute of Technology Bombay, Mumbai, India Bharadhwaj Sivakumaran, Professor of Marketing, Great Lakes Institute of Management, Chennai, Tamil Nadu, India Rahul R Marathe, Assistant Professor, Department of Management Studies, Indian Institute of Technology Madras, Chennai, India In comparative advertising, advertisers use differential ad formats (direct/indirect) and comparison strategies (targeting either the market leader or multiple brands). Here, we show that when direct comparisons are employed, it is advisable to compare oneself with multiple brands (rather than with the market leader); thus extending prior work in a managerial relevant way. [to cite]: Arti D Kalro, Bharadhwaj Sivakumaran, and Rahul R Marathe (2012) ,"The Gloves Are Coming Off! to Use Direct/Indirect Comparative Ads: Depends on the Comparison Strategy", in AP - Asia-Pacific Advances in Consumer Research Volume 10, eds. , Duluth, MN : Association for Consumer Research, Pages: 237-244. [url]: http://www.acrwebsite.org/volumes/1011172/volumes/ap11/AP-10 [copyright notice]: This work is copyrighted by The Association for Consumer Research. For permission to copy or use this work in whole or in part, please contact the Copyright Clearance Center at http://www.copyright.com/. Arti D Kalro, Assistant Professor, Shailesh J Mehta School of Management, Indian Institute of Technology Bombay, Mumbai, India Bharadhwaj Sivakumaran, Professor of Marketing, Great Lakes Institute of Management, Chennai, Tamil Nadu, India Rahul R Marathe, Assistant Professor, Department of Management Studies, Indian Institute of Technology Madras, Chennai, India ABSTRACT In comparative advertising, advertisers use differential ad formats (direct/indirect) and comparison strategies (targeting either the market leader or multiple brands). Here, we show that when direct comparisons are employed, it is advisable to compare oneself with multiple brands (rather than with the market leader); thus extending prior work in a managerial relevant way. EXTENDED ABSTRACT INTRODUCTION AND MOTIVATION FOR RESEARCH comparative advertising as “advertising which alternative brand by name, illustration, or other distinctive information”. Thus, comparative ads have two formats: direct (“Total Corn Flakes have more ) and indirect (“Tylenol is safer than other regular non-prescription pain relievers”). Also, comparative ads differ on another dimension: comparison strategy (‘multi-brand’: when a brand compares itself with multiple brands in that category or the ‘market leader’: when a brand compares itself with the leading brand). Prior research has shown that the effectiveness by moderating conditions like message characteristics (e.g. one-sided/two-sided message studied by Goodwin and Etgar 1980; negative or positive valence by Jain and Posavac 2004), media characteristics (e.g. competitive interference studied by Ang and Leong 1994, Kent and Allen 1994) product characteristics (e.g. Functional vs. Psychological studied by Goodwin and Etgar 1980) or audience characteristics (e.g. Need for Cognition and Self Construal studied by Polyorat and Alden 2005). However, there is no research on whether direct/indirect comparisons are better when a brand uses ‘multi-brand/market leader’ comparison strategy. In other words, does the effectiveness of comparison format depend on type of comparison strategy? It is important to answer this question since ‘multi-brand’ comparisons are used extensively (Kalro, Sivakumaran and Marathe 2010) and most research in this genre has studied single brand comparisons only (e.g. Gorn and Weinberg 1984, Chattpodhyay 1998, Chang 2007). This study examines the combined impact of comparative advertising formats (direct vs. indirect) and comparison strategy (‘market leader’ vs. ‘multibrand’) on consumer response/outcome variables (perceived manipulative intent, attitude towards the ad, attitude towards the brand, and perceived brand differences). In particular: Do ‘multi-brand’ or ‘market leader’ comparisons reduce the perceived manipulative intent, that is, “a state wherein a consumer infers that the advertiser is attempting to persuade him/ her by inappropriate, unfair, or manipulative means” (Campbell 1995), of direct and indirect comparative ads? Do ‘multi-brand’ or ‘market leader’ comparisons create stronger/weaker favorable attitudes toward direct and indirect comparative ads? CONCEPTUAL FRAMEWORK Comparative ads can evoke negative responses (Chang 2007). These negative responses may get augmented if the advertiser targets a particular competitor, especially the market leader, due to the inherent strength of belief in the market leader (Goodwin and Etgar 1980). Therefore, a direct comparative ad against the ‘market leader’ elicits more negative thoughts because consumers perceive this as an “attentionseeking” tactic of the advertiser. On the other hand, the higher information content of comparative ads leads to greater information processing and involvement of the consumers (Yagci, Biswas, and Dutta 2009); thus, reducing the perceived skepticism toward the comparative claim. Further, if comparisons are made against multiple players in that competitor is being attacked and they will perceive such ads to be more credible. Therefore, use of ‘multibrand’ comparison strategy in direct comparative ads | will reduce the perceived manipulative intent of the advertiser and create stronger favorable attitudetoward-the-ad (Aad). Also, availability of information across multiple competitors (particularly by referring to them explicitly) increases the vividness of the information, thus, encouraging the readers to engage in the elaboration of message information and also, activating the pre-existing knowledge structures. Comparative ads, by naming dominant brands, attempt such activation of pre-existing knowledge structures directly and thereby, encouraging the consumers to use the central route of information processing (Dröge 1989). Thus, this enhanced message involvement in direct ‘multi-brand’ comparisons encourages rational thinking and reduces skepticism or suspicion in the minds of the consumers and enhances favorable Aad. Thus, based on the Persuasion Knowledge Model and Attribution Theory, we posit that the difference in perceived manipulative intent (H1) and Aad (H2) between direct and indirect comparative ads will be higher when the advertising brand compares itself to the market leader than when it compares itself to multiple competitors. METHODOLOGY Kalro, Sivakumaran, and Marathe (2010) found that advertisers use comparative ads for both utilitarian and hedonic products equally; and that comparative ads were more common for products high on purchase decision involvement (PDI). Hence, based on Voss, Spangenberg and Grohmann (2003), and Mittal (1989), we chose the smart phone category that met the required criteria (MHED = 5.064; MUTI = 6.132 and Scale high PDI value = 5.606). an existing company, Toshiba. The model was named Toshiba TG-03 with Toshiba’s tagline, ‘Delivering the Best User Experience’ with six superior attributes (slimmest body, least weight, highest display resolution, largest screen, highest camera resolution and waterproof) relative to the referred-to brand(s). We conducted the study in a prominent university in India (N=109). The study was a 2 (comparison formats: direct/indirect) X 2 (comparison strategies: experimental design. The participants were asked to For direct ‘market leader’ comparisons, we compared Toshiba TG-03 against a real brand in the smart phone category, Apple iPhone (the market leader when this study was conducted in March 2009). For direct ‘multi-brand’ comparisons, Toshiba TG-03 was compared to Apple iPhone, Nokia 5800 Xpress Music and BlackBerry, in a tabular format, claiming superiority for Toshiba TG-03. For indirect comparative ads, the text read ‘Toshiba TG-03 is better than the leading brand’ (subtly referring to Apple iPhone in terms of its logo font and color) and in the indirect ‘multi-brand’ comparison it was compared to Brand X, Brand Y and Brand Z (indirectly referring to Apple iPhone, Nokia 5800 Xpress Music and BlackBerry respectively through the use of logos, fonts and colors). We used “Users of comparison brand” consumers” as covariates in this study (Barone, Palan and Miniard 2004). All the scales were adapted from extant literature (Table 1). Source Cronbach’s Alphas Voss, Spangenberg, and Grohmann (2003) .805 Mitchell and Dacin (1996) .874 Mittal (1989) .901 Chang (2007), Campbell (1995) .835 Muehling (1987), Dröge (1989) .846 Hedonic/Utility Subjective product class knowledge Purchase Decision Involvement (PDI) Perceived Manipulative Intent Attitude-toward-the-ad (Aad) RESULTS The two-way MANCOVA results are as follows: Pillai’s Trace = .105; Wilks’ lambda = .895; Hotelling’s Trace and Roy’s Largest Root = .117, 2 = .08. Both “Users of (all p’s > .10). The follow-up ANOVAs are presented below. As predicted, the interaction between comparison formats and manipulative intent (MDirect-Market Leader = 3.94, MDirect=2.89, MIndirect-Market Leader= 3.47, MIndirect-Multi = 3.34; Multi 2 = .09) (Figure 1). DISCUSSION AND CONTRIBUTIONS comparison format and comparison strategy on perceived manipulative intent and Aad. We found that broadly, manipulative intent was lower (higher) when multi-brand (market leader) comparisons were used for both direct and indirect comparative ads. Also, Aad was higher (lower) when multi-brand (market leader) comparisons were used. theoretical and managerial contributions. Consistent with recent studies (Chang 2007; Thompson and Hamilton 2006 condition (comparison strategy) that enhances Figure 1: PERCEIVED MANIPULATIVE INTENT (Note: The dashed Comparative Ads) line represents Indirect the effectiveness of comparative advertisements Supporting the hypothesis, the interaction between comparison formats and strategies on Aad Direct= 3.85, M = 4.92, M Market Leader Direct-Multi Indirect-Market Leader = 4.57, MIndirect-Multi = 4.71; F(1, 103) = 4.778, p < .05, 2 = .09) (Figure 2). Both interactions were in the predicted direction supporting H1 and H2. ‘multi-brand’ comparisons reduces the inference of manipulative intent for direct comparisons. Most prior research (e.g. Shimp and Dyer 1978, Grewal et al. 1997) found that direct comparative ads using ‘market leader’ comparison were ineffective. However, we show that direct comparison ads are not always seen negatively. When direct comparative ads use ‘multi-brand’ comparisons, they are evaluated | Figure 2: ATTITUDE-TOWARD-THE-AD (Aad) Hyp. Dependent Variables Independent Variables P Results H1 Perceived Manipulative Intent (Fig. 1) .034** Supported H2 Attitude-toward-the-Ad (Fig. 2) Comparison Format (Direct & Indirect) X Comparison Strategy (‘Market Leader’ & ‘Multi-Brand’) .031** Supported p p < .05 more positively. To the best of our knowledge, this competitors. In other words, our research suggests that the advertiser use ‘multi-brand’ comparisons directly. effects of using ‘multi-brand’ comparisons. This In case they need to target a market leader, they must is especially relevant since most comparative do so indirectly. Also, many advertisers may have advertising uses ‘multi-brand’ comparisons (Kalro et distinct styles and philosophies. Some would prefer al. 2010) while most extant research concerns itself to use direct over indirect comparisons. In this case, with ‘market leader’ comparisons. they may target multiple brands and not the market Managerially, our research brings to light leader alone. In case advertisers have a bias for practical implications for advertising executives. indirect comparison ads, they may target the market This study demonstrates that if advertisers wish leader and not multiple brands. Thus, our research shows the conditions under which advertisers may advantageous to use the ‘multi-brand’ comparison use direct/indirect comparisons and/or market leader/ strategy rather than comparing against the market multi brand comparison strategies. leader. 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(2009), “Effects of Comparative Advertising Format on Consumer Responses: The Moderating Effects of Brand Image and Attribute Relevance,” Journal of Business Research, 62 (8), 768-74. | Jun Yao, Monash University, Australia Harmen Oppewal, Monash University, Australia ABSTRACT This paper investigates how product type and interest rate as well as consumer expertise in loans sense of accountability and hence only succumb to decision (Kunda 1990). They will not knowingly select tempting alternatives when such a choice for down payments in the context of loan decisions. for utilitarian over hedonic goods and moderating effects of expertise. EXTENDED ABSTRACT The present paper investigates how extrinsic attributes, such as product type, interest rate (APR) as well as consumer intrinsic characteristics, such as expertise in consumer loan and attitude towards debt, in the context of loan decisions. LITERATURE REVIEW, THEORY AND HYPOTHESES Installment selling has been a popular marketing practice and nowadays offering installment credit has been widely adopted by retailers selling durable goods. In the literature on consumer loan decisions two issues have however remained unsolved. Would consumer loan decisions differ across utilitarian and hedonic goods? And is the promotion of “no deposit” effective in persuading consumers to take up loans. Previous research suggests that products can products (Batra and Ahtola 1991; Mano and Oliver 1993). Compared to utilitarian goods, consumption of hedonic goods is more associated with feelings of guilt and responsibility (Kivetz and Simonson 2002a, b; Lascu 1991; Strahilevitz and Myers 1998). A central idea in the behavioral literature about hedonic and utilitarian products is that, partly due to the guilt spending on utilitarian goods (e.g., Okada 2005). Also, Prelec and Loewenstein (1998) suggest that consumers are prone to coupling payments however this “coupling” is less likely to occur if tends to be the case with hedonic products. Extant literature shows that consumers try to maintain a 1996). Thus consumers are expected less willing to borrow or take up loans for pursuing hedonism. In addition, Okada (2005) empirically indicates that people are willing to pay more in time for hedonic goods and pay extra money for utilitarian postpone purchases of hedonic products until the money is saved, and to bring forward purchases of utilitarian products by borrowing, even though this incurs interest charges. Therefore an installment plan with a greater focus on consumption than on payments will be more consistent with a consumer’s motivation to buy utilitarian products than with a motivation to buy hedonic products. We thus predict that consumers utilitarian goods over purchases of hedonic goods. An installment loan can take many forms by varying attributes such as APR, loan duration, monthly repayment and down payment, allowing consumers to establish their preferences for installment plans (Ranyard and Craig 1995; Ranyar, Hinkley, Williamson and McHugh 2006). In terms of into consumer choices of automobile loans showed that loans with low interest rates, moderate contract lengths, high rebates and moderate down payments are preferred (Wonder, Wilhelm, and Fewings 2008). Because APR indicates the borrowing cost associated with the installment loan, consumers should always prefer a lower APR over a higher APR. The down payment (or deposit), is the initial upfront portion of the total amount due and it is usually paid in cash in installment buying. For consumers, the down payment may be perceived as an obligation but on the other hand, involves no borrowing cost since it is paid at the point of purchase. From a temporal discounting perspective, people will prefer options with low immediate costs such as down payments. However, the higher the down payment, the less interest will be charged on the outstanding balance, is at a low level (e.g., close to 0%), a loan requiring a lower down payment and a loan requiring a higher down payment are nearly invariant in terms of the borrowing cost and total cost. If the APR is higher however, a loan with a lower down payment incurs a higher borrowing cost and a higher total cost, compared to a loan with a higher down payment. Consumers are therefore expected to prefer a higher down payment when APR is high, whereas prefer a lower down payment when APR is low. Prior research shows that the expertise that consumers have in that particular problem solving (Soman and Cheema, 2002). In the context of loan decisions, experienced consumers should be more aware of the incremental difference in the borrowing cost and total cost associated with increases in APR, such that they are more likely to shift their attention from mitigating the immediate pain of paying to higher amount as a down payment, if possible. We thus predict that individual’s expertise in consumer loan moderates the effect of APR (low vs. high) on the preference for loan down payments. With respect to the relationship between consumer loan evaluations and product type, Kamleitner and Kirchler (2006)’s qualitative work has shown that shorter installment plans are often used for hedonic goods, such as vacation and TV, whereas longer loans are mainly taken for utilitarian goods such as furniture. From the perspective of term loan and a loan with a lower down payment, in that both incur higher borrowing costs and total costs, relative to a short-term loan and a loan with higher down payment. Also, similar to our prediction that purchases of hedonic products, they will also be more likely settle the debt early on a hedonic product than on a utilitarian product, even if they have to borrow. Thus consumers are expected to prefer a loan with durable goods while they prefer a loan with a lower APPROACH, FINDINGS AND DISCUSSION Two experiments were conducted. For study 1, a random sample of 85 undergraduate students completed an on-line survey in exchange for course credit. The experiment employed a single factor design that adapted Hirst, Joyce and Schadewald (1994)’s decide to buy a car for work use (utilitarian) as well as a sail boat for recreation (hedonic) simultaneously . The two goods were priced the same and it had to purpose of the loan. Study 2 was a laboratory experiment that employed a 2 (high APR vs. low APR) x 2 (utilitarian who completed the survey in exchange for course a set of furniture (vs. a home theatre system) under APR at 3% (vs. APR at 15%). They then indicated their willingness-to-pay (WTP) the down payment for the loan. Individual difference variables, such as expertise in consumer loan (Soman and Cheema, 2002) and attitude towards debt (Davies and Lea 1995) were measured. The results suggest that people who reported having more expertise in consumer loan are willing to pay a higher down payment when APR is high than those who reported themselves as having in terms of WTP the down payment between people with more expertise in consumer loan and people with less expertise when APR is low. Findings of the present paper extend the literature on mental accounting and debt use by empirically testing the effects of product type on consumer loan decisions. The difference in purchase behaviors for hedonic and utilitarian products Thus the temptation of using installment credit may be lower for purchases of hedonic products than for purchases of utilitarian products. 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