Why do firms invest in consumer advertising with limited sales response? A shareholder perspective


Marketing managers increasingly recognize the need to measure and communicate the impact of their actions on shareholder returns. This study focuses on the shareholder value effects of pharmaceutical direct-to-consumer advertising (DTCA) and direct-to-physician (DTP) marketing efforts. Although DTCA has moderate effects on brand sales and market share, companies invest vast amounts of money in it. Relying on Kalman filtering, the authors develop a methodology to assess the effects from DTCA and DTP on three components of shareholder value: stock return, systematic risk, and idiosyncratic risk. Investors value DTCA positively because it leads to higher stock returns and lower systematic risk. Furthermore, DTCA increases idiosyncratic risk, which does not affect investors who maintain well-diversified portfolios. In contrast, DTP marketing has modest positive effects on stock returns and idiosyncratic risk. The outcomes indicate that evaluations of marketing expenditures should include a consideration of the effects of marketing on multiple stakeholders, not just the sales effects on consumers.

Publication DOI: https://doi.org/10.1509/jmkg.75.1.109
Divisions: College of Business and Social Sciences > Aston Business School > Marketing & Strategy
Additional Information: © 2011, American Marketing Association. Ernst C. Osinga, Peter S.H. Leeflang, Shuba Srinivasan, Jaap E. Wieringa (2011) Why Do Firms Invest in Consumer Advertising with Limited Sales Response? A Shareholder Perspective. Journal of Marketing: January 2011, Vol. 75, No. 1, pp. 109-124.
Uncontrolled Keywords: stock price returns,stock price volatility,pharmaceutical marketing,advertising,time-varying parameters,Kalman filtering,Business and International Management,Economics and Econometrics,Marketing
Publication ISSN: 1547-7185
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Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
http://journals ... ?code=amma-site (Publisher URL)
PURE Output Type: Article
Published Date: 2011-01
Authors: Osinga, Ernst C.
Leeflang, Peter S.H. (ORCID Profile 0000-0001-7308-8937)
Srinivasan, Shuba
Wieringa, Jaap E.



Version: Published Version

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