Marketing's Credibility: A Longitudinal Investigation of Marketing Communication Productivity and Shareholder Value

Abstract Practitioners and scholars have questioned marketing communication's credibility because it has not been linked to firm shareholder value. Using secondary longitudinal data, the authors show that the impact of marketing communication productivity (MCP) on shareholder value is positive and nonlinear. In particular, the influence of MCP on the forward-looking performances of Tobin's q and stock return is curvilinear with an inverted U shape. The authors also investigate the moderating role of research-and-development investment and competitive intensity. The findings have implications for marketing managers regarding how to model and benchmark MCP and the dangers of blindly improving the productivity of advertising and sales promotion expenditures.

[1]  David C. Wheelock,et al.  PUBLISHED: Journal of Money, Credit and Banking, , 1996 .

[2]  A. Charnes,et al.  Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis , 1984 .

[3]  K. Srinivasan,et al.  Controlling for Observed and Unobserved Managerial Skills in Determining First-Mover Market Share Advantages , 1996 .

[4]  Vernon J. Richardson,et al.  Free Cash Flow, Agency Costs, and the Affordability Method of Advertising Budgeting , 2002 .

[5]  D. Aaker,et al.  The Strategic Role of Product Quality , 1987 .

[6]  David A. Aaker,et al.  The Effects of Sequential Introduction of Brand Extensions , 1992 .

[7]  W. Wells,et al.  Commercial Liking and Memory: Moderating Effects of Product Categories , 2001, Journal of Advertising Research.

[8]  Peter A. Dacin,et al.  Market Situation Interpretation and Response: The Role of Cognitive Style, Organizational Culture, and Information Use , 2003 .

[9]  John W. Byrd,et al.  Do outside directors monitor managers , 1992 .

[10]  Xueming Luo,et al.  Assessing advertising media spending inefficiencies in generating sales , 2005 .

[11]  John C. Haughey.  The Loyalty Effect , 1997, Business Ethics Quarterly.

[12]  S. Dutta,et al.  Success in High-Technology Markets: is Marketing Capability Critical? , 1999 .

[13]  D. Aaker,et al.  The Financial Information Content of Perceived Quality , 1994 .

[14]  Christina Y. M. Ng,et al.  An Empirical Study on the Relationship between Ownership and Performance in a Family-Based Corporate Environment , 2005 .

[15]  Charles E. Wasley,et al.  Capital Markets Research in Accounting , 2001 .

[16]  Agha Iqbal Ali,et al.  DEA Malmquist productivity measure: New insights with an application to computer industry , 2004, Eur. J. Oper. Res..

[17]  David A. Aaker,et al.  The Value Relevance of Brand Attitude in High-Technology Markets , 2001 .

[18]  E. Strong,et al.  Theories of selling. , 1925 .

[19]  Raimar Richers.  The theory of economic development , 1961 .

[20]  R. Rust,et al.  Customer Satisfaction, Productivity, and Profitability: Differences Between Goods and Services , 1997 .

[21]  D. Horsky,et al.  Evaluation of Salesforce Size and Productivity Through Efficient Frontier Benchmarking , 1996 .

[22]  M. Farrell.  The Measurement of Productive Efficiency , 1957 .

[23]  Tasadduq A. Shervani,et al.  Market-Based Assets and Shareholder Value: A Framework for Analysis , 1998 .

[24]  Craig Hiemstra,et al.  Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation , 1994 .

[25]  Roland T. Rust,et al.  Advertising Media Models: A Practical Guide , 1986 .

[26]  D. Mueller.  The dynamics of company profits: The persistence of profits in the United States , 1990 .

[27]  R. Jacobson,et al.  Trading off between Value Creation and Value Appropriation: The Financial Implications of Shifts in Strategic Emphasis , 2003 .

[28]  V. Rao,et al.  How is Manifest Branding Strategy Related to the Intangible Value of a Corporation? , 2004 .

[29]  J. Petersen,et al.  MAXIMIZING ROI or Profitability , 2004 .

[30]  Zvi Griliches,et al.  R&D and Productivity: The Unfinished Business , 1998 .

[31]  Gregory S. Carpenter,et al.  Measuring Marketing Productivity: Current Knowledge and Future Directions , 2004 .

[32]  James Durbin,et al.  Errors in variables , 1954 .

[33]  Shane A. Johnson,et al.  Buyer–Supplier Contracts versus Joint Ventures: Determinants and Consequences of Transaction Structure , 2000 .

[34]  Louis P. Bucklin,et al.  Productivity in marketing , 1978 .

[35]  P. Rajan Varadarajan,et al.  An Analysis of the Market Share-Profitability Relationship , 1993 .

[36]  Christine Moorman,et al.  The Role of Firm Resources in Returns to Market Deployment , 2003 .

[37]  R. Färe,et al.  Productivity changes in Swedish pharamacies 1980–1989: A non-parametric Malmquist approach , 1992 .

[38]  J. R. Moore,et al.  The theory of the growth of the firm twenty-five years after , 1960 .

[39]  Dominique M. Hanssens,et al.  The Persistence of Marketing Effects on Sales , 1995 .

[40]  T. Ambler,et al.  How Advertising Works: What Do We Really Know? , 1999 .

[41]  G. Dowling,et al.  Corporate reputation and sustained superior financial performance , 2002 .

[42]  Richard Staelin,et al.  A Look on the Cost Side: Market Share and the Competitive Environment , 1993 .

[43]  S. Grosskopf,et al.  PRODUCTIVITY CHANGE IN SWEDISH PHARMACIES 1980–1989: A NONPARAMETRIC MALMQUIST APPROACH , 1992 .

[44]  William Boulding,et al.  Commentary on Unobservable Effects and Business Performance: Do Fixed Effects Matter? , 1990 .

[45]  R. Jacobson.  Unobservable Effects and Business Performance: Reply to the Comments of Boulding and Buzzell , 1990 .

[46]  Lopo L. Rego,et al.  Customer Satisfaction, Cash Flow, and Shareholder Value , 2005 .

[47]  Xueming Luo,et al.  Working with Rivals: The Impact of Competitor Alliances on Financial Performance , 2007 .

[48]  E. Anderson,et al.  Dual Emphasis and the Long-Term Financial Impact of Customer Satisfaction , 2005 .

[49]  Füsun F. Gönül,et al.  Modeling Multiple Sources of Heterogeneity in Multinomial Logit Models: Methodological and Managerial Issues , 1993 .

[50]  Theodore Sougiannis.  The Accounting Based Valuation of Corporate R&D , 1994 .

[51]  P. Rajan Varadarajan,et al.  Standardization versus Adaptation of International Marketing Strategy: An Empirical Investigation , 1993 .

[52]  Timothy W. Ruefli,et al.  Schumpeter's ghost: Is hypercompetition making the best of times shorter? , 2005 .

[53]  Sales Response to Advertising , 1990 .

[54]  C. Reese,et al.  A Bayesian operationalization of the resource‐based view , 2004 .

[55]  G. Erickson,et al.  Gaining comparative advantage through discretionary expenditures: the returns to R&D and advertising , 1992 .

[56]  William Boulding,et al.  Sustainable Pioneering Advantage? Profit Implications of Market Entry Order , 2003 .

[57]  A. U.S.,et al.  Measuring the efficiency of decision making units , 2003 .

[58]  Charles H. Sevin.  Marketing productivity analysis , 1965 .

[59]  David Wilemon,et al.  Managing the R&D-Marketing Interface , 1987 .

[60]  Douglas A. McManus,et al.  Resolving the Scale Efficiency Puzzle in Banking , 1993 .

[61]  Naveen Donthu,et al.  Benchmarking Advertising Efficiency , 2001, Journal of Advertising Research.

[62]  J. Hauser,et al.  Integrating R&D and marketing: A review and analysis of the literature , 1996 .

[63]  C. Fornell,et al.  Customer Satisfaction and Shareholder Value , 2004 .

[64]  Larry E. Toothaker,et al.  Multiple Regression: Testing and Interpreting Interactions , 1991 .

[65]  Rolf Färe,et al.  Advertising efficiency and the choice of media mix: a case of beer , 2004 .

[66]  Rajdeep Grewal,et al.  Strategic Responses to New Technologies and Their Impact on Firm Performance , 2004, Journal of Marketing.

[67]  R. D. Buzzell.  Commentary on Unobservable Effects and Business Performance , 1990 .

[68]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[69]  Larry Percy,et al.  Strategic Brand Management , 2007 .

[70]  Ben S. Branch,et al.  Perceptions of Firm Quality: A Cause or Result of Firm Performance , 1990 .

[71]  L. R. Christensen,et al.  THE ECONOMIC THEORY OF INDEX NUMBERS AND THE MEASUREMENT OF INPUT, OUTPUT, AND PRODUCTIVITY , 1982 .

[72]  Tasadduq A. Shervani,et al.  Marketing, Business Processes, and Shareholder Value: An Organizationally Embedded View of Marketing Activities and the Discipline of Marketing , 1999 .

[73]  Timothy G. Pollock,et al.  EFFECTS OF SOCIAL CAPITAL AND POWER ON SURVIVING TRANSFORMATIONAL CHANGE: THE CASE OF INITIAL PUBLIC OFFERINGS , 2004 .

[74]  Jerry A. Hausman,et al.  Errors in Variables in Panel Data , 1984 .

[75]  J. Barney.  Strategic Factor Markets: Expectations, Luck, and Business Strategy , 1986 .

[76]  J. Hausman.  Specification tests in econometrics , 1978 .

[77]  S. Malmquist.  Index numbers and indifference surfaces , 1953 .

[78]  John Kim,et al.  Advertising productivity: developing an agenda for research , 2001 .

[79]  Peter R. Dickson,et al.  Getting Return on Quality: Revenue Expansion, Cost Reduction, or Both? , 2002 .

[80]  M. Hirschey,et al.  Advertising, R&D Expenditures and the Market Value of the Firm , 1993 .