Can your advertising really buy earned impressions? The effect of brand advertising on word of mouth

Mitchell J. Lovett, Renana Peres, Linli Xu

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Paid media expenditures could potentially increase earned media exposures such as social media posts and other word-of-mouth (WOM). However, academic research on the effect of advertising on WOM is scarce and shows mixed results. We examine the relationship between monthly Internet and TV advertising expenditures and WOM for 538 U.S. national brands across 16 categories over 6.5 years. We find that the average implied advertising elasticity on total WOM is small: 0.019 for TV, and 0.014 for Internet. On the online WOM (measured volume of brand chatter on blogs, user-forums, and Twitter), we find average monthly effects of 0.008 for TV and 0.01 for Internet advertising. Even the categories that have the strongest implied elasticities are only as large as 0.05. Despite this small average effect, we do find that advertising in certain events may produce more desirable amounts of WOM. Specifically, using a synthetic control approach, we find that being a Super Bowl advertiser causes a moderate increase in total WOM that lasts 1 month. The effect on online WOM is larger, but lasts for only 3 days. We discuss the implications of these findings for managing advertising and WOM.

Original languageEnglish (US)
Pages (from-to)215-255
Number of pages41
JournalQuantitative Marketing and Economics
Volume17
Issue number3
DOIs
StatePublished - Sep 15 2019

Bibliographical note

Funding Information:
We thank the Keller-Fay Group for the use of their data and their groundbreaking efforts to collect, manage, and share the TalkTrack data. We gratefully acknowledge our research assistants at the Hebrew University--Shira Aharoni, Linor Ashton, Aliza Busbib, Haneen Matar, and Hillel Zehavi?and at the University of Rochester--Amanda Coffey, Ram Harish Gutta, and Catherine Zeng. We thank Daria Dzyabura, Sarah Gelper, Barak Libai, Ken Wilbur, and the editor and anonymous review team for their helpful comments. We thank participants of our Marketing Science 2015, INFORMS Annual Meeting 2015, Marketing Science 2017, Marketing Dynamics 2017, NYU 2017 Conference on Digital, Mobile Marketing and Social Media Analytics, the 4th Annual Workshop on Experimental and Behavioral Econ in IS (WEBEIS) 2018 sessions and at the Goethe University, University of Minnesota, and University of Houston Seminar Series. This study was supported by the Marketing Science Institute, Kmart International Center for Marketing and Retailing at the Hebrew University of Jerusalem, the Israel Science Foundation, and the Carlson School of Management Dean?s Small Grant.

Keywords

  • Advertising
  • Brands
  • Dynamic panel methods
  • Earned media
  • Paid media
  • Synthetic control methods
  • Word of mouth

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