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

Mitchell J. Lovett (), Renana Peres () and Linli Xu ()
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Mitchell J. Lovett: University of Rochester
Renana Peres: Hebrew University of Jerusalem
Linli Xu: University of Minnesota

Quantitative Marketing and Economics (QME), 2019, vol. 17, issue 3, No 1, 215-255

Abstract: 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.

Keywords: Word of mouth; Advertising; Brands; Dynamic panel methods; Paid media; Earned media; Synthetic control methods (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11129-019-09211-9

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