Is Persuasive Advertising Always Combative in a Distribution Channel?

The existing marketing literature suggests that persuasive advertising elicits counteractions from competing manufacturers and consequently leads to wasteful cancellation of the advertising effects. Thus, persuasive advertising is widely perceived to be combative in nature. A series of papers by Shaffer and Zettelmeyer (2002, 2004a,b) demonstrate that appropriate targeting may partially mitigate the combative nature of persuasive advertising in that either the rival manufacturer or the retailer may benefit. In this paper, we complement their results by demonstrating the possibility that every channel member may benefit from persuasive advertising, i.e., a Pareto improvement along the distribution channel, thereby leading to the conclusion that persuasive advertising need not result in channel conflict.