Advertising effectiveness: The moderating effect of firm strategy

Leigh McAlister, Raji Srinivasan, Niket Jindal, Alberta Cannella

Research output: Contribution to journalArticle

48 Scopus citations

Abstract

Advertising's influence on firm sales and firm value has drawn early attention from economists and accountants and more recent attention from marketers. Most studies that have investigated a link between advertising and sales have found such a link. However, studies that have investigated a link between advertising and firm value have only sometimes found that link. Meta-analysis has failed to determine moderators that govern the link between advertising and firm value. In this article, the authors hypothesize that advertising influences firm value for a differentiator because advertising can elaborate the firm's point of difference into brand equity, thereby building firm value. Advertising cannot build brand equity for a cost leader because such a firm has no point of difference on which to build. Identifying differentiators and cost leaders on the basis of firms' reactions to a change in accounting regulations, the authors confirm hypotheses: advertising is related to sales for all firms, but it is more strongly related to firm value for differentiators than for cost leaders. Beyond explaining differences in advertising effectiveness, this study's indicator of differentiation versus cost leadership should enhance future analyses of marketing's effect on firm-level outcomes using archival financial data.

Original languageEnglish (US)
Pages (from-to)207-224
Number of pages18
JournalJournal of Marketing Research
Volume53
Issue number2
DOIs
StatePublished - Apr 1 2016

Keywords

  • Advertising
  • Cost leadership
  • Differentiation
  • Firm value
  • Sales

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Marketing

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    McAlister, L., Srinivasan, R., Jindal, N., & Cannella, A. (2016). Advertising effectiveness: The moderating effect of firm strategy. Journal of Marketing Research, 53(2), 207-224. https://doi.org/10.1509/jmr.13.0285