Can your advertising really buy earned impressions? The effect of brand advertising on word of mouth
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Can your advertising really buy earned impressions? The effect of brand advertising on word of mouth Mitchell J. Lovett 1
& Renana
Peres 2 & Linli Xu 3
Received: 9 March 2018 / Accepted: 4 March 2019/ # The Author(s) 2019
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 * Mitchell J. Lovett [email protected] Renana Peres [email protected] Linli Xu [email protected]
1
Simon Business School, University of Rochester, Rochester, NY, USA
2
School of Business Administration, Hebrew University of Jerusalem, 91905 Jerusalem, Israel
3
Carlson School of Management, University of Minnesota, Minneapolis, MN, USA
M. J. Lovett et al.
1 Introduction Paid advertising could potentially increase earned media exposures such as social media posts and word of mouth (WOM, hereafter). Brand conversations commonly reference advertisements with estimates of online buzz about movie trailers ranging from 9% (Gelper et al. 2016) to 15% (Onishi and Manchanda 2012), and Keller and Fay (2009) estimate that 20% of all WOM references TV ads. Some industry reports claim that the impact of advertising on WOM is considerable (Graham and Havlena 2007; Nielsen 2016; Turner 2016), and that the impact on total WOM (online and offline) can amplify the effect of paid media on sales by 15% (WOMMA 2014). In some cases, this expectation to boost earned mentions is used to justify buying high priced ad spots in programs like the Super Bowl (Siefert et al. 2009; Spotts et al. 2014). In contrast, scholarly research that estimates the WOM impressions gained from advertising is scarce. As illustrated in Fig. 1, the current literature either focuses on the influence of advertising on sales (Naik and Raman 2003; Sethuraman et al. 2011; Danaher and Dagger 2013; Dinner et al. 2014), WOM o
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