The Effects of Publicity on Demand: The Case of Anti-Cholesterol Drugs

This study investigates the effect of publicity on consumer demand. Although the marketing literature suggests that publicity can have an important influence on consumers’ choices, only a few studies have attempted to quantify how media coverage can affect consumer demand. The main obstacle to measuring the impact of publicity is that data on media coverage are difficult to interpret. To overcome this obstacle, we develop an algorithm to collect information presented in news articles and to map this information into a multi-dimensional attribute space. By applying our algorithm to news articles covering statins (a class of anti-cholesterol drugs) accessible in Canada from 1993-2004, we find evidence that media coverage plays a role in influencing physicians’ choice of statins. Our results suggest that not all forms of publicity are equal. We find that comparison articles are much more effective than non-comparison articles. Moreover, we find that the most effective type of publicity is to provide information on the cholesterol-lowering ability of the drug, and the second most effective type of publicity is about side-effects. Surprisingly, despite the fact that the ultimate goal of taking anti-cholesterol medication is to reduce risks of heart disease, publicity related to this dimension has very little impact on demand. We also find evidence that physicians/patients may generalize clinical evidence on individual drug specific ability to reduce heart disease risks to the whole class of statins. The results suggest that manufacturers of the drugs which are more potent in reducing cholesterol could free-ride on the heart disease clinical evidence for other drugs. Our results could help firms decide which types of post-marketing clinical trials to invest.