How Do Marketing Investments Benefit Brand Revenue Premiums?

How do marketing investments (such as price promotions, new product introductions and advertising) contribute to a brand’s revenue premium? Moreover, how do brand and category characteristics moderate the impact of the marketing investments on brand revenue premiums? In this paper, I address these questions with a large-scale econometric analysis of marketing investments and associated brand revenue premiums in the automobile industry. The results suggest that while investments in advertising and product innovations are successful in generating building long-run brand revenue premiums, investments in sales promotions are not. Interestingly, corporate branding strategies significantly enhance the revenue premium effects of new product introductions and brand advertising, relative to mixed and house-of-brands strategies. Moreover, the effectiveness of such investments from a brand revenue premium perspective are higher for leading brands with higher perceived appeal and quality, that are characterized by more pioneering innovations, but with narrower product-line breadth.