Advertising and Quality: An Empirical Analysis
Posted: 1 Jul 1998
Date Written: April 1996
In this paper we examine the relationship between product quality and advertising expenditures empirically. Unlike previous works in the literature, we explicitly distinguish between objective quality and (consumer) perceived quality. In fifteen product classes, five frequently purchased and ten durable goods, we find virtually no relationship between advertising expenditures and objective quality (as measured by Consumer Reports) after accounting for price and market share. However, advertising spending influences consumers perceptions of quality positively, especially for frequently purchased goods, even after accounting for objective quality, price, and market share. These results suggest that advertising plays an important role in shaping consumers quality perceptions merely by exposing them to the brand name.
JEL Classification: L15, M37, C21
Suggested Citation: Suggested Citation