Reputation and Advertising of Collective Brand Members in the Wine Industry: The Moderating Role of Market Share

This paper analyzes the nonlinear relationship between the advertising investment and reputation of collective brand members in an experience goods industry, as well as the moderating role of their market share within the collective brand. The central assumption is that the quality reputation of col...

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Bibliographic Details
Published in:Journal of wine economics 2021-05, Vol.16 (2), p.169-188
Main Authors: Sellers-Rubio, Ricardo, Mas-Ruiz, Francisco, Sancho-Esper, Franco
Format: Article
Language:English
Subjects:
Advertising
Brand names
Capital expenditures
Consumers
Economic analysis
Game theory
Market shares
Markets
Motivation
Product quality
Reputations
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Summary:This paper analyzes the nonlinear relationship between the advertising investment and reputation of collective brand members in an experience goods industry, as well as the moderating role of their market share within the collective brand. The central assumption is that the quality reputation of collective brand members has a positive effect on their advertising investment until a reputation threshold is reached, after which the effect on advertising investment becomes negative. This change in the slope is explained by the information sets (firm reputation and collective reputation) used by consumers to reduce uncertainty, which leads to a weaker motivation for the firm to invest in advertising. In addition, scale economies of advertising mean that the market share of collective brand members negatively moderates the curvilinear relationship between quality reputation and advertising investment. The results for a sample of 176 companies in a Spanish experience goods industry (i.e., winemaking) between 2004 and 2014 show an inverted U-shaped relationship between the advertising investment and reputation of collective brand members. The results also show that market share negatively moderates this curvilinear relationship. (JEL Classifications: M31, M37, Q13)
ISSN:1931-4361
1931-437X
DOI:10.1017/jwe.2020.52