Advertising Quality in Sales Response Models

Hedonic price theory is adapted to advertising. A quality-adjusted advertising spending function is embedded in a sales response model and the parameters of both equations are estimated in one step. The procedure provides an alternative to the judgmental aggregation of attributes of advertising quality into a single value. The results permit comparison of the sales effects of variations in advertising spending with the effects of variations in copy quality, and permit computation of an advertising figure that accounts for both copy quality and actual spending. A pilot study illustrates the procedure.