There’s No Free Lunch Conversation: The Effect of Brand Advertising on Word of Mouth

Category: Marketing Seminar
When: 31 August 2017
, 12:15
 - 13:30
Where: Campus Westend, RuW 1.201
Speaker: Dr. Renana Peres (Hebrew University of Jerusalem)

Practitioners have a widely-held belief that brand advertising strongly influences the volume of word of mouth (WOM) the brand receives, yet academic research on the topic is scarce and shows mixed results. We examine the relationship between monthly Internet and TV advertising expenditures and the total (offline and online) WOM for 538 U.S national brands across 16 categories over 6.5 years. We find that the average implied advertising elasticity on WOM is 0.016 for TV, and 0.010 for Internet, both of which are small relative to the existing estimates. Even the categories that have the strongest implied elasticities are only as large as 0.05. Although ads are mentioned in brand conversations (e.g., an average of 10% of brand conversations mention TV ads), these ads appear to trigger very few additional conversations. Furthermore, individuals with many (10+) social ties generate approximately 50% more WOM than individuals with few ties, but individuals with few ties exhibit a stronger relationship between advertising and WOM. We discuss the implications of these findings for managing advertising and WOM.