Discovering how Advertising Grows Sales and Builds Brands

Abstract

Advertising nudges consumers along the think–feel–do hierarchy of intermediate effects of advertising to induce sales. Because intermediate effects—cognition, affect, and experience—are unobservable constructs, brand managers use a battery of mind-set metrics to assess how advertising builds brands. However, extant sales response models explain how advertising grows sales but ignore the role of intermediate effects in building brands. To link these dual contributions of advertising, the authors propose an integrated framework that augments the dynamic advertising–sales response model by integrating the hierarchy, dynamic evolution, and purchase reinforcement of intermediate effects. Methodologically, the new approach incorporates the intermediate effects as factors from mind-set metrics while filtering out measurement noise, extracts the factor loadings, estimates the dynamic evolution of the factors, and infers their sequence in any hypothesized hierarchy by embedding their impact in a dynamic advertising–sales response model. The authors apply the proposed model and associated method to a major brand to discover the brand's operating hierarchy (advertising → experience → cognition → affect ↔ sales). The results provide the first empirical evidence that intermediate effects are indeed dynamic constructs, that purchase reinforcement effects exist not only for experience but also for other intermediate effects, and that advertising simultaneously contributes to both sales growth and brand building. Thus, both researchers and managers should consider using the proposed framework to capture advertising's dual contributions of building brands and growing sales.