Marketing's Impact on Firm Value: Generalizations from a Meta-Analysis

Abstract

The interest in the value relevance of marketing investments has given rise to numerous studies on the marketing–finance interface. This study integrates extant research findings and establishes empirical generalizations on marketing's impact on firm value. Specifically, the authors conduct a meta-analysis of prior econometric elasticity estimates of the stock market impact of marketing actions and marketing assets. Analyses based on 488 elasticities drawn from 83 studies reveal a mean elasticity of .04 for advertising expenditure variables and of .54 for marketing asset variables. Among marketing assets, customer-related assets show a higher mean elasticity of .72, compared with .33 for brand-related assets. Further analyses show that advertising elasticities are lower in more concentrated industries and that marketing asset elasticities are higher during recession times. Researchers should also be aware that characteristics of the research design (e.g., the type of firm value metric used, the omission of control variables, or not accounting for endogeneity) may affect the estimation results.

Good, better, engaged? The effect of company-initiated customer engagement behavior on shareholder value

“…If that occurs, then building up reputation again is costly and very difficult, as can be observed, for example, in the financial sector (e.g., Hewett et al 2016). Having a strong reputation is a very valuable asset that needs to be safeguarded, as there are strong consequences for future earnings (Edeling and Fischer 2016). Given that customer engagement initiatives can increase the risk of gaining a negative reputation, it carries with it the potential threat of harming a firm's value.…”

Business cycle research in marketing: a review and research agenda

“…Movie critics' ratings have larger impact during economic downturns than during economic expansions. Edeling & Fischer (2016) Marketing assets Marketing asset elasticities are higher during recession times. Peers et al (2017) Tourism marketing The allocation of marketing budgets across countries over the BC is determined by the pro-or counter-cyclical nature of three factors: unit sales, marketing effectiveness, and per-unit profit contribution.…”

“…The same recommendation is provided by studies that linked the cyclical fluctuations in advertising to long-term firm performance, such as Deleersnyder et al (2009) . In a recent meta-analysis, Edeling and Fischer (2016) look at the stockmarket impact of both current advertising expenditures (a flow variable) and market assets (stock variables, which can be brand related, like brand equity, or customer related, like customer equity). They find the marketing-asset elasticities to be higher during recession times (while no such effect was found for advertising expenditure elasticities).…”

“…6 Since the meta-analysis in Sethuraman et al (2011) is cross-sectional, for each study in their sample, the recession variable reflects the number of months that the economy is in a recession as a proportion of the total number of months in the estimation period. A similar approach is used in the recent meta-analysis of Edeling and Fischer (2016). Even though BC dates as labelled by the aforementioned institutions are well-accepted, and used repeatedly in recent marketing studies, there are some potential drawbacks.…”

The value of empirical generalizations in marketing

“…Some work already exists in the area of investor response to marketing, using metrics such as stock returns and market value relative to book value. An excellent example in this context is the empirical generalizations paper by Edeling and Fischer (2016). Based on a review of 488 elasticities drawn from 83 studies, they report an average advertising➔firm value elasticity of 0.04 and an average marketing assets➔firm value elasticity of 0.54.…”