Because of rapid development of wireless communication technology, there is an increasing adoption of mobile advertising, such as location based advertising (LBA). To what extent can LBA improve advertising effectiveness is an important topic in the field of wireless communication technology research. Most researches quantify long term impacts of advertisings by VAR (Vector Autoregressive) model. However, compared to VAR model, VECM (Vector Error Correction Model) is a better method in that it allows one to estimate both a long-term equilibrium relationship and a short-term dynamic error correction process. In this study, we employ VECM to explore LBA’s (Location Based Advertising) and PUA’s (Pop-up Advertising) sales impact in both short and long terms. The developed VECM reveals that LBA’s sales impact is about more than2 times as big as PUA’s in short dynamic term and nearly 6 times bigger than PUA’s in long equilibrium term. These findings add to advertising and VECM literatures. These results can give managers more confident to apply wireless communication technology to advertising.
Modeling Multivariate Time Series by Vector Error Correction Models (VECM) (Study: PT Kalbe Farma Tbk. and PT Kimia Farma (Persero) Tbk)
