New product preannouncements,advertising investments,and stock returns

This study examines the synergistic effects of advertising spending and new product preannouncements (NPPAs) on stock market responses. The empirical results indicate that returns of preannouncing firms over both the short- and long-term could be improved by an increase in advertising expenditure. Additionally, the results also show that the positive impacts of earnings and revenues can be enhanced, while the negative influence of trading costs can be reduced, for preannouncing firms with higher advertising expenditures. The holding returns of institutional investors can also increase with greater spending on advertising. Therefore, marketing communication strategies that aim to reduce information asymmetry within NPPAs, coupled with greater advertising expenditures, would yield more favorable investor responses.     

Do stock prices undervalue investments in advertising?

Under the efficient market hypothesis, the stock price incorporates the full value of a firm’s advertising. If so, advertising spending should not be associated with future abnormal stock returns. Nevertheless, from 1995 to 2015, advertising spending often leads to abnormal stock returns the following year. The strongest results surface for consumer goods and services where advertising used to build brand equity can carryover from one year to the next. No significant differences arise for healthcare, industrial goods, or retailer advertising. Healthcare and industrial goods advertising is often modest. Retailer advertising that builds traffic should have little if any carryover into the following year. These results may help marketing managers defend an advertising budget whose benefits carryover into the following year, but hurt current profits. Having more investment analysts on Wall Street with a marketing background should help reduce this overly conservative “wait and see” discount for carryover advertising.     

Brand equity and retailer acceptance of brand extensions

Two important benefits of brand equity have largely been assumed in most previous research: reduced marketing expenditures required to launch brand extensions; and channel participants as an important source of brand equity. Results of a discrete choice experiment with independent retail grocers indicate that brand names influence independent retailers’ probability of listing brand extensions, but their sensitivity to mix elements such as consumer advertising, promotional allowances, and wholesale price, as well as competitors’ listing actions are not influenced by brand names. This means that retailers treat each dollar of consumer advertising or promotional allowance the same, regardless of who is spending it. Manufacturers should not assume that retailers will be less sensitive to other elements of the marketing mix for stronger brands.     

The asymmetric effect of warranty payments on firm value: The moderating role of advertising,R&D,and industry concentration

Changes in firms’ warranty payments are informative signals that enable investors to form timely expectations about potential changes in product quality. The authors’ survey shows that warranty payments affect potential investors’ product quality assessments and stock investment likelihood. Their quantitative analysis reveals an asymmetric stock market reaction: unanticipated increases in warranty payments (which signal quality “losses”) lower stock returns but unanticipated decreases do not affect stock returns. Two important factors moderate this relationship. First, boosting advertising spending attenuates the negative stock return effect of unanticipated increases in warranty payments. Second, unanticipated decreases in warranty payments, which signal quality “gains”, translate into higher stock returns when the industry has become less concentrated. Interestingly, changes in R&D spending do not moderate investors’ response to unanticipated increases or decreases in warranty payments. The authors advise firms to use advertising to lessen the harm from warranty payment increases and to strongly communicate warranty payment decreases in the face of intensified competition. The authors also caution that offering warranties in general does not ensure greater firm value as declining quality firms that myopically offer warranty programs experience lower firm value than those that do not provide warranties.     

Deceptive advertising and abnormal stock returns

This study examined the impact of deceptive advertising on the abnormal stock returns of firms. Using an event study analysis with 101 cases from the FTC database over the period 1987–2005, the FTC rulings on deceptive advertising were found to have the negative effects on the abnormal stock returns of firms. Among the firm-specific factors examined in this study, the amount of advertising expenditures played a role in alleviating the impact of deceptive advertising on the abnormal stock returns, and the firms charged with consent agreements alone were found to lose less firm value than those charged with additional actions by the FTC. Results also showed that the negative effects on the abnormal stock returns created by the FTC actions did not quickly disappear afterwards. These results imply that marketing managers should exercise caution in designing advertising messages that may or may not intend to violate the FTC rules and regulations on deceptive advertising.     

Optimal checkout strategies for online retailers

Growth in online retailing has driven retailers to focus on optimizing the consumers’ shopping journey. One of the most important aspects of online shopping is the checkout process offered by the retailer. This paper focuses on factors influencing retailers’ choice of providing either a flexible checkout or a restricted checkout option to consumers. We define a checkout strategy as flexible when consumers can purchase items in their shopping cart either as a guest or by logging into their account. In contrast, with a restricted checkout strategy, the consumers must log in to the account to make purchases. With a game-theoretic model and duopolistic framework, the current study identifies conditions in which online retailers might adopt symmetric strategies and those in which two ex-ante symmetric retailers might prefer asymmetric strategies. The analysis suggests that the relative proportion of privacy-conscious (PC) vs. convenience-conscious consumers (CC), additional utility due to account registration, reduction in transaction cost, and additional revenue due to targetability are the crucial determinants of the strategies adopted by online retailers.Specifically, we show that retailers adopt a restricted checkout strategy when additional revenues due to targeted advertising are relatively high. Retailers adopt a flexible checkout strategy when the proportion of CC consumers and additional revenues due to targeted advertising are relatively lower. Furthermore, an asymmetric equilibrium may also exist when the proportion of CC consumers is relatively high and additional revenues due to targeted advertising are in the intermediate range. Our modeling framework provides a consumer demand-based (rather than cost-based) justification as a plausible explanation for why we observe ex-ante identical retailers offering distinct checkout strategies.     

Drivers of the synergy between price cuts and store flyer advertising at supermarkets and discounters

Despite retailers’ intense use of both price cuts and store flyer advertising, it is still unclear whether and when it is beneficial for retailers to combine the two promotion tools at the same time as opposed to using them separately. We systematically investigate synergies between price cuts and store flyers for a broad set of 488 brands from 44 consumer packaged goods categories across six leading German retailers. We find that a clear majority of the brands benefit from positive synergies and hence, combining price cuts and store flyer advertising is recommended, especially at supermarkets. This synergy can be strong. For instance, a 15 % price cut without store flyer support at a supermarket, on average, increases sales by 11 %, and medium spending on store flyers for the brand at its regular (non-promoted) price results in a sales lift of 8 %. The combined use of both tools, however, increases sales by 52 %, much more than the sum of their separate effects (11 % + 8 % = 19 %). Yet, there is also substantial variance in the synergy, which we explain with retailer format (supermarkets versus discounters) as well as various brand and category characteristics. Our findings have important implications for the coordination of promotion activities by retailers.     

What factors determine e-satisfaction and consumer spending in e-commerce retailing?

Evidently, the Internet has resulted in a fundamental shift in retailing practice, creating a shift in both consumer and business behavior, which has been compared to that of the Industrial Revolution. The purpose of this paper is to analyze customer satisfaction in e-commerce market. In particular, we determine the factors that affect customer e-satisfaction and the relationship between customer satisfaction and consumer spending in e-commerce retailing. We focus on how American based e-commerce firms are impacted by these developments and how marketing practices have reflected the developing e-commerce situation. The results show that customer satisfaction does have an impact on consumer spending in American based e-commerce retailers. Further, the relationship between customer satisfaction and consumer spending is positive, where higher e-satisfaction results in more spending in e-commerce. The results also show that there is a direct relationship among e-service quality, e- satisfaction and e-loyalty in terms of online spending by consumers. However, the analysis shows that e-commerce still faces challenges compared with traditional offline retailers since customers cannot feel and try the products, and may end up choosing the products that they do not want.     

Advertising competition in presidential elections

Presidential candidates purchase advertising based on each state’s potential to tip the election. The structure of the Electoral College concentrates spending in battleground states, such that a majority of voters are ignored. We estimate an equilibrium model of multimarket advertising competition between candidates that allows for endogenously determined budgets. In a Direct Vote counterfactual, we find advertising would be spread more evenly across states, but total spending levels can either decrease or increase depending on the contestability of the popular vote. Spending would increase by 13 % in the extremely narrow 2000 election, but would decrease by 54 % in 2004. These results suggest that the Electoral College greatly increases advertising spending in typical elections.     

It pays to pay attention: How firm's and competitor's marketing levers affect investor attention and firm value

Investors' attention to a firm's stock has been demonstrated to influence stock returns (Da et al., 2011). But does a firm's marketing information draw attention to a firm's stock? Research in finance, accounting, and marketing has investigated advertising as one potential driver of investors' attention to a firm's stock. How about other potential marketing drivers? The authors develop hypotheses related to the impact of the changes in four marketing levers: advertising, product development announcements, WOM, and customer satisfaction on the change in investor attention to a firm's stock. Furthermore, they investigate the moderating role of competitors' marketing levers in these relationships.To test the hypotheses, they compile a panel dataset with 349 firms covering the 2007–2017 period. The results suggest that the changes in the focal firm's advertising and WOM have a positive and significant impact on the changes in investor attention to the focal firm’s stock. Furthermore, these effects are amplified when there is an increase in competitors' advertising spending and WOM, respectively. For the customer satisfaction lever, the results suggest that the change in competitors' customer satisfaction enhances the impact of the change in focal firm's customer satisfaction on investor attention. Collectively, the results suggest that investors attend to the firm's and its competitors' marketing information in a much more nuanced manner than previously thought.     

The impact of advertising,goodwill, and other intangibles in the retail foodservice industry: Do intangible investments bite into investor returns?

Utilizing a sample of U.S. publicly traded foodservice retailers, this study examines the impact of advertising, goodwill, and intangible assets on investor holding period returns. The results show that neither advertising nor intangible assets have a positive and significant impact on holding period returns. Goodwill, however, does have a positive and significant impact on holding period returns. Foodservice retailers may therefore want to question the effectiveness of growth strategies based on a firm’s own investments in either advertising or intangible assets. Instead, building a foodservice retailing business through mergers and acquisitions may prove a better use of company resources.     

Advertising spending patterns and competitor impact

In most industries, brand managers do not advertise continuously. Instead, advertising is switched on and off systematically, a phenomenon often referred to as pulsing. Moreover, spending levels vary considerably across periods when brands do advertise. Surprisingly, this variety in advertising spending patterns as observed in practice, as well as competitor impact on these patterns and their sales outcomes, have received relatively little empirical attention. In this paper we focus on two core aspects of observed advertising patterns: incidence and magnitude. Insights are based on the analysis of advertising spending for 370 CPG brands in 71 product categories over a four-year period. We also collected feedback from practitioners dealing with advertising across a wide range of firms. We first empirically establish that pulsing is the dominant form of advertising scheduling. Observed patterns, in turn, are largely driven by television and print advertising. Next, we show that, after accounting for a wide range of other possible drivers, advertising in-sync with competitors is more common than out-of-sync. However, the results suggest that competitive reasoning plays only a relatively minor role in advertising decisions. Finally, we show that, across a wide range of real-world scenarios, investing in top-of-mind awareness through maintenance advertising insulates brands from competitors' actions and boosts sales.     

US political media buying 2004

This study examined political spending in all nine categories of advertising and marketing communications, broken down by media segment, political race and election year. The advertising sector includes spending on broadcast television, cable television, radio, newspapers, the Internet, outdoor and magazines/ITV. The marketing sector includes spending on direct mail and public relations/promotions.     

Sustaining shopping momentum in retail malls using real-time messaging

Retail malls thrive not only on foot traffic they attract but also on buyers spending at multiple retailers in the mall. While the importance of shopping momentum, i.e., buyers continuing to shop, is known, few studies have examined how mobile promotions can incentivize buyers to sustain their shopping momentum in a mall. This study examines how a mall operator targets buyers in its loyalty program with a real-time message (RTM) to encourage them to sustain their shopping momentum and spend more at the next retailer. We use a quasi-experimental design and show that the RTM has a stronger effect on heavy than light buyers. Specifically, moderate and heavy buyers are more likely to respond favorably to RTMs by sustaining shopping momentum and increasing spending at the next retailer. In contrast, the RTM has no effect on shopping momentum of light buyers, and if they continue to shop, they lower their subsequent spending. The study has important implications for retailers using mobile applications to target buyers with relevant real-time promotions to achieve desired outcomes.     

How organizational identification among retail employees is affected by advertising

This paper investigates whether the organizational identification among retailer employees can be influenced by advertising aimed at consumers. The results of an experimental study of employees at a large grocery retailer show a positive impact of advertising exposure on organizational identification. Employee perceptions of advertising effectiveness (and not their feelings of pride with regards to the advertising) are found to explain this effect. The results suggest that advertising can serve an important human resource role tool by helping retailers build organizational identification amongst its employees. Further managerial implications are discussed in the paper.     

The effect of perceived advertising effort on brand perception: implication for retailers in Hong Kong

This paper examines how advertising effort, specifically advertising creativity and advertising believability, may influence consumers’ perceptions of a retailer’s business philosophy, and in turn consumers’ behavior toward retailers in Hong Kong. Altogether five hundred and eighty-three respondents (i.e. 320 college students and 263 shoppers) were surveyed. The results suggested that retailers that are regarded as having more creative advertising are perceived as being more learning-oriented, which leads to higher brand recognition. Meanwhile, retailers that are regarded as having more believable advertisements are perceived as having higher levels of integrity, and as a result are better recognized and more likely to be patronized. This research contributes to literature in retailing and marketing communication by establishing the antecedents and consequences of building a learning-oriented and trustworthy business philosophy in a cultural specific context. It also provides practical guidance for retailers who aim to increase brand recognition and purchase intentions through promotional effort.     

Retailer Advertising and Retail Competition in the UK

Radical changes have occurred in distribution in the UK over the past three decades. These structural changes have stimulated most retailers to increase their real advertising expenditure. The author analyses the main factors that have brought about the growing intensity of retail advertising as a form of non-price competition.     

Performance of China’s advertising agencies: a time series cross-sectional analysis

Although China has been the world’s second largest advertising market after the United States in terms of advertising spending since 2006, the performance of advertising agencies in China and the factors that contribute to this performance have been understudied. However, by incorporating the structure-conduct-performance model and agency theory into the integrative framework and conducting a time series cross-sectional analysis, we determine that the degree of concentration in the advertising agency industry and number of regulations in the advertising industry have had significant negative effects on the financial performance of agencies. In addition, agencies with mainly foreign capital have performed better than those with only Chinese capital. Agencies adopting strategies of initial public offering (IPOs) or engaging in name changes and mergers have performed better than those that have done nothing. Implications are also discussed.     

Competitive advertising within store flyers: A win–win strategy?

This study investigates the effect of competitive advertising within store flyers on both manufacturers and retailers. Prior research implies that competitive advertising may be detrimental for manufacturers and beneficial for retailers. Findings from an intersubject experiment that uses various familiar and unfamiliar competing brands confirm that store flyers’ competitive advertising improves consumers’ perceptions of the variety of the retailer’s assortment, which has a positive impact on intentions to visit the store and buy. However, increasing the number of competing brands does not harm manufacturers; rather, it enhances recognition of brands, especially for well-known brands. This article concludes with a discussion of the theoretical and managerial implications of these findings for the design of store flyers.     

It's not only what they buy,it's also what they keep: Linking marketing instruments to product returns

Online retailers implement various marketing instruments to boost their sales. These marketing instruments can not only impact sales, but also product returns. However, when assessing the performance of marketing instruments, retailers often ignore potential return effects. Theoretically, marketing instruments could increase or decrease returns, depending on how they affect expected and experienced costs and benefits related to a product. In this paper, we empirically examine whether, and how a comprehensive set of marketing instruments (newsletters, catalogs, coupons, free shipping, paid search, affiliate advertising and image advertising) affects product returns. We use data from two major online retailers and show that return effects vary largely across marketing instruments. Surprisingly, none of the instruments reduces product returns. Newsletters, paid search, catalogs and free shipping increase returns substantially by up to 18%. For free shipping and catalogs, the return effects emerge prevalently for fashion categories, whereas online advertising and newsletters increase returns of both fashion and non-fashion products. These findings enhance our understanding of how firm-initiated marketing instruments affect returns and provide guidance for online retailers in multimedia environments.