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

E.C. Osinga, P.S.H. Leeflang, S. Srinivasan, J.E. Wieringa

Research output: Contribution to journalArticleScientificpeer-review

Abstract

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.
Original languageEnglish
Pages (from-to)109-124
JournalJournal of Marketing
Volume75
Issue number1
Publication statusPublished - 2011

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Direct-to-consumer advertising
Marketing
Shareholders
Idiosyncratic risk
Stock returns
Physicians
Investors
Shareholder value
Systematic risk
Kalman filtering
Pharmaceuticals
Managers
Value stocks
Methodology
Evaluation
Value effect
Expenditure
Market share
Multiple stakeholders

Cite this

Osinga, E. C., Leeflang, P. S. H., Srinivasan, S., & Wieringa, J. E. (2011). Why do firms invest in consumer advertising with limited sales response? A shareholder perspective. Journal of Marketing, 75(1), 109-124.
Osinga, E.C. ; Leeflang, P.S.H. ; Srinivasan, S. ; Wieringa, J.E. / Why do firms invest in consumer advertising with limited sales response? A shareholder perspective. In: Journal of Marketing. 2011 ; Vol. 75, No. 1. pp. 109-124.
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Osinga, EC, Leeflang, PSH, Srinivasan, S & Wieringa, JE 2011, 'Why do firms invest in consumer advertising with limited sales response? A shareholder perspective', Journal of Marketing, vol. 75, no. 1, pp. 109-124.

Why do firms invest in consumer advertising with limited sales response? A shareholder perspective. / Osinga, E.C.; Leeflang, P.S.H.; Srinivasan, S.; Wieringa, J.E.

In: Journal of Marketing, Vol. 75, No. 1, 2011, p. 109-124.

Research output: Contribution to journalArticleScientificpeer-review

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