The brand manager's dilemma: Understanding how advertising expenditures affect sales growth during a recession

Abstract

What is the relationship between a company's advertising expenditure during a recession and its sales? For many years, studies have found that increasing or maintaining advertising expenditure levels during a recession tends to correspond to better rates of sales growth in future years. Yet none of these studies have used widely available and well respected data sources together with advanced statistical techniques to make their case. This study assembles new data in a statistically reliable framework to examine the effect of the amount spent on advertising on sales during the recession of 1990–1, and finds a measurable relationship between the two, even when controlling for other factors such as company size and past sales growth.