John Zhang has a message for Cingular Wireless and Verizon Wireless or, for that matter, any company that uses its ads to attack a competitor. Instead of luring away your competitor's customers, you may just be hurting yourself.
Zhang, a Wharton marketing professor, has found that combative ads -- the sort of comparative spots that beer makers, particularly Anheuser-Busch and Miller, are famed for -- may backfire. Instead of pulling consumers to an advertiser, they may just make people indifferent to all offerings in a product category. And that, in turn, can lead to lower profits for everyone as businesses cut prices to lure these buyers. "Combative advertising, a characteristic of mature markets, is defined as advertising that shifts consumer preferences toward the advertising firm but does not expand the category demand," Zhang says in his research paper titled, "A Theory of Combative Advertising."
That's exactly the sort of advertising that Cingular and Verizon, the country's largest wireless companies, have employed. A year and a half ago, for example, Cingular ran a checklist comparing its service, side by side, with Verizon's. At the time, Cingular defended the ad, saying it had been provoked by its competitor's errant claims. "The best advertising for the category is where companies talk about their benefits," said Marc Lefar, Cingular's chief marketing officer, in a newspaper interview. "But we will not be bashful at all about clarifying misleading advertising by our competitors." Lately, the two carriers have both taken to boasting about the quality of their networks. Verizon claims that it has "America's most reliable network," while Cingular insists it has the "fewest dropped calls."
Zhang's study -- conducted with Yogesh Joshi and Jagmohan Raju, both of Wharton, and Yuxin Chen of New York University -- suggests that any company tempted to engage in advertising combat should think twice.
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