Post-Recall Stock Market Signals: The Impact of Ad Spending on Sales Performance

This research proposes and empirically tests whether adjustments to post-recall advertising spending strategy can be used as an effective tool to create a competitive advantage in resources, thus impacting a firm's future sales decline after a product recall event. This paper explores where the...

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Bibliographic Details
Published in:Journal of promotion management 2021, Vol.27 (6), p.765-787
Main Authors: Huang, Jianping "Coco", Radighieri, Jeffrey P.
Format: Article
Language:English
Subjects:
Ad spending
Advertising
Advertising expenditures
Brands
Competitive advantage
damage control
focal brand
institutional brand
non-focal brand
Product recalls
Resource allocation
Sales
Securities markets
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Summary:This research proposes and empirically tests whether adjustments to post-recall advertising spending strategy can be used as an effective tool to create a competitive advantage in resources, thus impacting a firm's future sales decline after a product recall event. This paper explores where the firm's advertising resources should be allocated: the focal brand (the recalled brand), a non-focal brand (another brand in the portfolio), or the institutional brand (the family brand) in order to determine the optimal advertising spending strategy. The findings show that firms should allocate advertising spending to promote the institutional brand in order to mitigate the impact of spillover effects of recalls on a firm's future sales performance.
ISSN:1049-6491
1540-7594
DOI:10.1080/10496491.2021.1888172