Advertising Effectiveness within the Business Cycle
(A2024-119628)

AUTHORS

Minxiong Huang, University of Groningen; Maarten Gijsenberg, University of Groningen

ABSTRACT

The impact of expansions and contractions on advertising effectiveness has been long noticed. Despite rare exceptions, studies typically forego possible dynamics of advertising effectiveness within expansions and contractions. This study investigates the within dynamics based on a sample of 159 consumer packaged good brands across 18 years. Adopting an error- correction model, our results suggest that advertising effectiveness indeed varies between the early and the late stage of both expansions and contractions, as well as between market leaders and followers. Our findings extend insights regarding the impact of economic conditions on advertising effectiveness from between periods to within periods, and the impact of firm heterogeneity. Our findings also provide practical implications that brands should set their advertising strategies based on both the economy and their role in the marketplace.