Document Type : Research Paper
Author
Department of Agricultural Economics, Sayyed Jamaleddin Asadabadi University, Asadabad, Hamedan, Iran.
Abstract
Keywords
Main Subjects
Extended Abstract
Objectives
Dairy products, especially milk, from the view of consumers, in addition to being good for health-giving product, from the view of agricultural product producers, are a strategic product, and from the view of government and decision makers, it is a factor in changing the level of social welfare. Although factors such as encouraging consumption through generic advertising can have a great effect on consumption motivation, the presence of brand advertising can be effective in promoting consumption. In general, brand advertising focuses on promoting a specific brand or company, while generic advertising focuses on promoting the product category as a whole (here, milk). In general, the main purpose of brand advertising is to increase the level of sales, and the main purpose of generic advertising is to increase the level of consumption. Mainly, brand advertising is done by companies, firms and marketers, but generic advertising is done by unions or governments. Generic advertising is used to increase the profits of the industry. Brand advertising, on the other hand, promotes a particular company's product(s) and affects market share. The purpose of generic advertising is to increase overall market demand. In generic advertising, all companies, firms and producers benefit according to their market share, but in brand advertising, in addition to the benefit of the advertising company itself, other companies also benefit due to the existence of the "free-riding" effect. In this research, an attempt has been made to provide a structural framework to examine the effects of free-riding on brand and generic advertising of milk. Also, choosing the right method to share and determine the optimum budget for generic and brand advertising between companies in order to maximize the profit of the industry is one of the main goals of this research.
Material and Methods
In this research, a structural framework will be presented to investigate the effects of free-riding on brand and generic advertising of milk. Also, the selection of the appropriate method for sharing and determining the optimum budget for generic and brand advertising between companies is examined in order to maximize the profit of the industry. In this study, the modified method of Bass et al., 2005; Roma &; Perrone, 2011 has been used to determine the distribution and cost of generic and optimal brand advertising and free-riding. In general, in the case of generic and brand advertising, companies and production groups can collude or participate in different budget allocations. Participation can be independent (without participation) or participation as a sharing mechanism between the parties as a fixed percent or as a share of the market (sales proportional). Therefore, the index of the intensity of generic advertising and the brand of companies was investigated in three cases without participation, participation as a fixed percentage and sale proportional. In this study, the empirical values of the structural framework have been investigated in an econometric analysis of retail competition in the marketing of Iranian milk products. This study is based on the annual data of milk product sales and unit value in 2020 and 2021. The data required for this study is the amount of production (sales) and the annual retail price of dominant company in milk industry as the production of the first production group (or firm) in 7 provinces of West and East Azerbaijan, Fars, Khorasan, Isfahan, Golestan, Gilan and the amount of production (sales) and price The annual retail sale of milk of other companies (the second company) is 2. This information was obtained from Stock Exchange Organization, Iran Dairy Products Industry Association, Livestock and Poultry Support Company, and Iran Statistics Center.
Results
The average optimal budget of generic and brand advertising was estimated under the conditions of FP and SP mechanisms in different scenarios of brand and generic advertising of milk. Based on the average results for the years 2020 and 2021, with the increase in the elasticity of brand advertisements (0.017, 0.199, 0.435, 0.5, 1, 1.5) in both scenarios of elasticity of generic advertisements (0.004, 0.29), the intensity index of generic advertisements with a fixed percentage mechanism in the share of advertising expenses decreases (maximum 4.612 and minimum 0.357 for 2020 and maximum 6.201 and minimum 0.231 for 2021). Also, on average for the years 2020 and 2021, with the increase in brand advertising intensity index in both generic advertising intensity index scenarios, the brand advertising intensity index decreases with a fixed percentage mechanism in the advertising budget share (maximum 4.847 and minimum 0.004 for the year 2020 and maximum 6.189 and minimum 0.004 for the year 2021). On average, for the years 2020 and 2021, with the increase in the elasticity of brand advertisements in both scenarios of the elasticity of generic advertisements, the intensity index of generic advertisements decreases with the mechanism of sales proportional (maximum 2.451 and minimum 0.174 for the year 2020 and maximum 3.265 and at least 0.112 for the year 2021). Also, on average for the years 2020 and 2021, with the increase of the brand advertising intensity index in both scenarios of the generic advertising intensity index, the intensity index of brand advertising decreases with the mechanism of sales proportional to advertising budget share (maximum 7.294 and minimum 0.004 for 2020 and maximum 9.361 and minimum 0.006 for the year 2021). Besides, it can be seen in different scenarios of generic advertising intensity index, the increase in generic advertising intensity index has decreased the optimal generic and brand advertising budget intensity index in both SP and FP mechanisms in both 2020 and 2021.
Conclusion
In this research, an attempt has been made to provide a structural framework to examine the effects of free-riding on the brand and generic advertising of the Iranian milk industry. One of the main goals of this research is to choose the right method to share and determine the budget of generic advertising and the optimal brand between companies in order to maximize the profit of the industry. For this purpose, two mechanisms of cost sharing with a fixed percentage (FP) and sales proportional (SP) are used for dominant company in milk industry on the one hand (the first production group) and other production companies (the second production group) for the optimal rate of advertising intensity. Brand and generic were evaluated for two years, 2020 and 2021. Based on the results, with the increase of generic and brand advertising elasticity, the optimal budget intensity index of generic and brand advertising increases in both mechanisms, but in general, the optimal budget intensity index of brand advertising in both mechanisms for both years 2020 (2.239 and 3.390) and 2021 (2.704 and 4.062) are higher than the intensity index of the optimal generic advertising budget for both 2020 (1.905 and 0.946) and 2021 (2.727, 1.692). As can be seen, the intensity index of brand and generic advertising in both mechanisms has increased from 2020 to 2021. The comparison of FP and SP mechanisms in both brand and generic indicators shows that the intensity index of generic and optimal brand advertising is greater in the mechanism of sales proportional of advertising cost participation than the index of intensity of general advertising and optimal brand in the fixed percentage of advertising cost participation mechanism. Therefore, it can be concluded that the effects of free-riding and the type of advertising cost sharing can have an effect on the optimal level of the advertising intensity index. Therefore, milk production companies in Iran's milk production industry should try to create an optimal mechanism for sharing advertising costs in order to maximize the profit of the industry and hence, maximize their own profit. In order to increase consumption, the government and planners should create a suitable mechanism for proper advertising. For this purpose, provide consulting services, coordination and guidance for companies in the milk production industry to cooperate in the method of sharing the cost of brand and generic advertising. Finally, the comparison of 2020 and 2021 shows that the type of mechanism and intensity index of brand and generic advertising is strongly influenced by the parameters of the evaluation year. So these indicators should be calculated separately for the year.
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