THE ADAPTIVE INFORMATION-PROCESSING HYPOTHESIS

Abstract

Previous research at Anheuser-Busch reported that the relationship between advertising expenditures and sales can exhibit a V-shaped pattern, with greater sales at both increased and reduced levels of advertising expenditures. While the right-side of the V-effect is consistent with the traditional perspective on the advertising-sales relationship, the left-side is not. Though the existence of the V-effect has considerable implications for advertising efficiency, theory which accounts for its effects or the conditions under which it occurs is limited. This paper critically evaluates previously proposed segment-based explanations for the V-effect and proposes a new (Adaptive Information Processing) hypothesis to account for its effects. The hypothesis suggests interesting implications for advertising decisions.