Understanding the Relationship between Ad Expenditures and Perceived Quality
36 Pages Posted: 6 Apr 2022 Publication Status: Under Review
While some studies have found the effect of ad expenditures on perceived quality to be positive and significant, others have shown that, under certain circumstances, ad expenditures do not impact perceived quality. Several factors have been studied as moderators of this relationship, but past research provides limited insight into why ad expenditures have a stronger impact on perceived quality in certain contexts. We contribute to the advertising to quality perceptions literature by drawing on the accessibility-diagnosticity model from consumer psychology to examine a variety of moderating factors. We examine brand-, category-, and country-level moderators of the expenditures-quality effect. Utilizing a monthly dataset of 898 brands in 48 categories across more than four years, this study provides a comprehensive picture regarding the relationship between ad expenditures and perceived quality. Theoretical and managerial implications of the findings are discussed.
Keywords: advertising, Perceived Quality, Accessibility-Diagnosticity, Panel data, Signaling, Econometric Models
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