Why Do Firms Invest in Consumer Advertising with Limited Sales Response? A Shareholder Perspective

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.

The Effects of Marketing Expenses on Firm Performance: Empirical Evidence from the BIST Textile, Leather Index

“…In this context, [1] highlighted that the goal of businesses is the high market value of firm, not just profit or more which has been accomplished via the sales revenue of firms. Business firm value represents the expected future value that mostly depends upon the marketing activities of the firm [2]. Marketing and advertising expenditures are accepted as an element which affects the profitability negatively in the short term.…”

Waardering van en voor marketinginspanningen

“…Ook in andere studies zijn (positieve) effecten van reclame op investeerders, en dus aandelenkoersen, gevonden. Alhoewel de resultaten van Osinga et al (2010) betrekking hebben op een specifieke branche (geneesmiddelen) met voorschrijvers en eindgebruikers (patiënten), passen zij in dit beeld dat andere studies hebben opgeroepen.…”

“…Dit laatste risico kan door een goed uitgebalanceerde en gediversifieerde portefeuille worden geëlimineerd. Osinga et al (2010) zijn met name interessant omdat de effecten van op consumenten gerichte reclame (DTC = direct-to-consumer advertising) op de verkopen en de winst gering of in een aantal gevallen negatief zijn (Kremer et al, 2008). Dit in tegenstelling tot marketinginspanningen die gericht zijn op voorschrijvers (artsen, specialisten): direct-to-physician marketing (DPM), waar vaak wel…”

Influence of Sales Promotion Techniques on Consumers’ Purchasing Decisions at Community Pharmacies

“…Due to the fact that the dynamic expansion of the pharmaceutical market of the KSA is still ongoing [2], an increasing level of trade competition is observed. This explains why most pharmaceutical companies invest time and money in the field of marketing and try to find more effective promotion tools to further increase their sales and revenues [3][4][5]. Nowadays, the pharmaceutical industry uses a range of promotion techniques at the retail level of the pharmaceutical market [6] to try and reach consumers indirectly by below the line (btl) marketing techniques that stimulate sales [5,7].…”