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.     

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.     

Direct effect of advertising spending on firm value: Moderating role of financial analyst coverage

Previous research distinguishes between direct and indirect effects of advertising spending on firm value. This research focuses on the direct effect of advertising based on the spillover and signaling effect of advertising. Both effects are the result of increased public information flow about the firm created by advertising. Another source of public information flow about firms is information produced by financial analysts. We hypothesize that the direct effect of advertising on firm value will be stronger for firms not covered by financial analysts than for those that are covered because investors may rely on information flow from financial analysts for covered firms and rely on information flow from advertising in the absence of analyst coverage. Using financial and accounting databases for publicly traded firms for a period from 1975 to 2015, we test this hypothesis and find empirical evidence for the moderating role of analyst coverage in the relationship between advertising spending and firm value.     

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.     

Advertising Spending and Quality for Services: The Role of Capacity

In this paper we explore the relations among advertising spending, capacity and quality for services. Data from a sample of New York City restaurants show that mid-quality restaurants spend more on advertising than either high quality or low quality ones, contradicting the usual Nelson-type prediction that advertising spending increases with quality. Also, controlling for quality, restaurants with larger capacities advertise more. We present a model of services to explain these observations. The key features of the model are: (1) capacity constraints, (2) uncertain demand, (3) the presence of both informed and uninformed consumers, and (4) a technological link between capacity and quality. We argue that for services, advertising not only informs consumers, but it also can improve capacity utilization. Given this dual role, advertising is more valuable to firms with larger capacities and higher price-cost margins. The variation of these two elements with quality determines the advertising-quality relation.     

Can socially irresponsible firms benefit from corporate advertising?

Abstract

Can corporate advertising improve firm performance following a brand crisis borne out of corporate social irresponsibility (CSI)? This article investigates socially irresponsible firms and their corporate advertising expenditures, which can be used to counter negative opinions. First, we examine whether firms experiencing a negative brand image due to socially irresponsible behavior alter their corporate advertising expenditures. Next, we assess the resulting impact of corporate advertising spending by CSI firms on overall performance. Using a sample of firms engaging in socially irresponsible behavior between 1995 and 2011, we find that such firms tend to increase their corporate advertising. Such changes in corporate advertising expenditures ultimately impact firm performance. Specifically, an increase in corporate advertising helps to reduce the negative effect of CSI on firm performance.     

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.     

Pricing and persuasive advertising in a differentiated market

This paper examines the effects of consumer preferences, firms’ costs, and advertising efficiencies on firms’ pricing and persuasive advertising strategies. We show that as the firms’ horizontal differentiation increases, the firm with a lower value-added product tends to increase persuasive advertising, whereas its competitor tends to reduce advertising. Second, the firm receiving a favorable shock in product valuation will complement the favorable change with additional persuasive advertising rather than reduce advertising spending. Third, an equal improvement in advertising efficiency in the industry will lower the profits for both firms, whereas a decrease in advertising efficiency in the industry can benefit both firms. Fourth, a larger shock that improves a firm’s product valuation or unit cost is more likely to induce higher advertising spending in the industry. Lastly, an exogenous increase in the separation between firms’ product valuations or perceived qualities may actually reduce the price dispersion in the industry.     

On the Value Relevance of Retailer Advertising Spending and Same-store Sales Growth

In response to recent calls to study factors that determine a retailer's stock price, this study draws on signaling theory to examine the impact of two key marketing metrics that are widely disclosed by retailers to investors, advertising spending and growth in same-store sales (COMPS), and highlights the moderating role of various firm- and sector-specific factors. Using a stock-response model estimated on a sample of 1,646 observations for 257 retailers, the authors find that the value relevance of advertising spending and COMPS depends on the financial condition of, and the competitive pressures faced by, the retailer. In addition, the positive effect of COMPS on stock returns is found to be stronger in the presence of decreases in advertising spending.     

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.     

Britt,Steuart Henderson. Psychological Principles of Marketing and Consumer Behavior. Lexington,Mass.: Lexington Books, 1978

Abstract

Conventionally, an advertiser's spending on the creative component of an advertising campaign is small in relation to the media budget and is channeled exclusively to a single advertising agency. Gross challenged those conventions more than 20 years ago, using a mathematical model of advertising effectiveness. His model suggested spending more on the creative component and doing so in a competition among several independent sources. The model assumed a normal distribution of effectiveness of advertisements. Data on response to consumer product ads show that the distribution of effectiveness is not normal, but quite skewed. Using Monté Carlo simulations and Gross's framework, the authors find that the skewness strengthens the case for competition. Shifting a sizable percentage of a campaign budget away from media spending and into competitive generation of creative renderings apparently can be very profitable.     

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.     

Joe Camel

Dialogue about the use and impact of Joe Camel has dissipated since RJ Reynolds retiredthe advertising campaign in 1997. However, Joe Camel remains important for advertising because of its controversial and prominent use as a worldwide celebrity presenter. Using a historical lens equipped with before, during and after Joe Camel data, we examine Camel print advertising performance, adult brand usage, market share and advertising/promotional spending from 1986 to 2003. Our research suggests that, though Joe was an ideal celebrity endorser who attained excellent print recognition scores, his direct effect on sales in the short and longer term is unclear considering that Camel’s overall market share stayed mostly the same during the Joe Camel campaign. In the end, Joe may have met his demise like any other celebrity endorser whose bad behaviour threatens to cause negative associations that could prove harmful to a brand.     

Why the Generalized Bass Model leads to odd optimal advertising policies

We show that the optimal advertising strategy under the Generalized Bass Model (GBM) involves beginning at an extremely low level (the lower the better) and then increasing spending throughout the planning period. This strategy remains optimal in the presence of decreasing prices that affect both margins and diffusion speed. We provide a simple explanation for why this happens. We further show that the intuitively appealing patterns of continuous decrease or increase-then-decrease (both with an uptick towards the end) identified in earlier research are also possible as optimal dynamic advertising paths under the GBM structure, but only if the advertising at launch is constrained to be higher than a particular threshold, which we identify. The constraint necessary to generate intuitively appealing strategies lowers overall profits. Therefore, the GBM generates advertising policy recommendations that most marketers would deem odd. This casts doubt on the value of the GBM for normative purposes. Other existing diffusion models are preferred when seeking normative guidance on optimal dynamic advertising policies for new products subject to word of mouth.     

Advertising Spending Efficiency of Beauty-Care Product Companies: Comparison Between Local Companies and Multinational Companies in the U.S. Market

ABSTRACT

In this study, the authors apply data envelopment analysis (DEA) to evaluate the financial efficiency of U.S. beauty-care companies and foreign companies based on their media advertising expenditures in eight key media outlets (i.e., magazines, newspapers, outdoor, network TV, spot TV, syndication TV, cable TV, and radio) and their revenues in the U.S. market. The analyses revealed that 47.4% of the companies examined advertised efficiently. Companies that advertised inefficiently could save, on average, 75% of their advertising spending. The results also indicated that although U.S. companies are more efficient overall than are non-U.S. companies in terms of advertising spending, the competitiveness of non-U.S. companies should not be underestimated because some of them advertised efficiently (e.g., Kao Corporation from Japan) or almost efficiently.     

How to Monitor Competitive Advertising

Marketing managers are becoming increasingly aware of the benefits from structured and continuous monitoring of competitor advertising activity. To know quickly and accurately how much competitors are spending on their media advertising and how they are utilizing their budgets can be of profound help to marketing management, advertising agency planners and creative teams. Systematic monitoring can signal moves made by competitors—introducing new products or product modifications, special offers, new strategies and approaches to markets not previously covered. Of interest to the analyst are innovations in competitor strategies.     

Ernest Dichter and motivation research: new perspectives on the making of post-war consumer culture

Advertising as a proportion of national income rose from the late 1940s and peaked in the mid-to-late 1950s. This growth however exhibited inflection points in 1949 and 1951 which coincided with political economy shifts. During this period of growth all sectors producing consumer goods increased expenditure on advertising; expenditure on advertising by the tobacco, and the clothing and footwear sectors rose the most relative to consumer spending on these product categories. From the mid-1950s, advertising of household goods, a category which included electrical durables and furniture, rose at the fastest rate.     

Can Sinful Firms Benefit from Advertising Their CSR Efforts? Adverse Effect of Advertising Sinful Firms’ CSR Engagements on Firm Performance

This study investigates corporate social responsibility (CSR) of sinful firms, which refer to ones that are operating in controversial industries, including the production and distribution of alcohol, tobacco, gambling, adult entertainment, firearm, military, and nuclear power. We attempt to answer two questions in this study: (1) Do these sinful firms actively advertise their CSR engagements compared to non-sinful firms? And (2) do their advertising efforts really yield increased financial performance? Positing that advertising not only can make sinful firms’ good deeds visible, but also can highlight the contradiction between these firms’ stigma and their prosocial activities, we claim that sinful firms are likely to advertise their CSR engagement to overcome their stigmatized firm image, but these advertising activities will make the firms’ performance vulnerable by inducing skepticism from stakeholders. Using KLD database in conjunction with COMPUSTAT and Center for Research in Security Prices from 1991 to 2010, where 337 firms are involved in the controversial sinful industries, namely tobacco, alcohol, gaming, firearms, military, and nuclear power, we examine the effect of advertising spending of sinful firms’ CSR engagement on performance vulnerability, which is instantiated with idiosyncratic risk. The empirical results indicate that sinful firms increase their advertising expenditure when they engage in CSR programs, but these efforts for advertising CSR tend to increase idiosyncratic risk. This finding indicates that even though sinful firms can benefit from engaging in socially responsible initiatives, advertising their CSR efforts may backfire.     

The Ethics of Food Advertising Targeted Toward Children: Parental Viewpoint

The children’s market has become significantly more important to marketers in recent years. They have been spending increasing amounts on advertising, particularly of food and beverages, to reach this segment. At the same time, there is a critical debate among parents, government agencies, and industry experts as to the ethics of food advertising practices aimed toward children. The␣present study examines parents’ ethical views of food advertising targeting children. Findings indicate that parents’ beliefs concerning at least some dimensions of moral intensity are significantly related to their ethical judgments and behavioral intentions of food advertising targeting children as well as the perceived moral intensity of the situation.     

Advertising as an Entry Deterrent: Evidence from UK firms

Advertising is widely considered to be an important isolating mechanism through which firms may defend an established competitive advantage. However, there is relatively little empirical evidence on the extent of the strategic use of advertising either to deter or in response to entry. In this paper, I report on a study of the advertising practices of 843 medium‐sized and large UK‐based firms. Nearly one‐quarter of all the advertisers surveyed state that they attribute importance to entry deterrence as an aim of their advertising. Further, one in five managers of advertising firms state that they would increase advertising expenditure if a new rival company appeared in their market. It is also apparent that there is a strong correlation between the perceived importance of advertising as an entry‐deterring tool and the intensity of advertising spending. Multivariate modelling provides confirmation that the existence of a sheltered market position, and the profitability that typically accompanies this, provides a statistically significant determinant of the decision to use advertising as a strategic entry‐deterring weapon.