The direct, indirect and feedback effects of marketing actions

This dissertation aims to study the impact of marketing actions on the firm as a whole. My work identifies and analyzes three effects that may cause firm-level effects of marketing actions. The direct effect of marketing is defined as an effect that acts on a variable, without any intermediary variables. For example, advertising leading to an increase in sales may be considered as a direct effect. As opposed to this, indirect effects act through other mediating variables, such as the impact of advertising on stock prices, through its effect on (increasing) sales. Finally, feedback effects are the effects on the original marketing actions, as a result of the response to that action. Thus, the increase in advertising budgets due to an observed increase in sales from increased advertising may be considered a feedback effect. I argue that the analysis of these three effects is important to fully understand the complete impact of marketing actions on firm level metrics.; My first essay studies the impact of advertising on firm stock prices, by separating the direct and indirect effects. Using data from the computer industry, and time series econometrics, I find that advertising can have a long-run direct effect on stock prices, which is above and beyond its effect on sales.; My second essay demonstrates the existence and importance of the feedback effect, in the context of innovation in the automobile industry. Using 10 years of monthly data, and QUAL-VAR methodology to allow inclusion of the innovation variable in the time-series methodology, I find that foreign firms are more likely to have innovation momentum which gives them a long-term strategic advantage.; Finally, my third paper analyzes the interaction effect of advertising expenditure and movie profitability. Using the well-established event study methodology, I find that pre-launch advertising helps create expectations of movie performance, which lead to stock price correction post-launch.