Advertising Spending and Perceived Quality

In this paper we examine the relationship between advertising spending and perceived product quality. The questions we ask are: Does a product's advertising spending in ̄uence consumers' perceptions of its quality? If so, does the effect remain even after accounting for objective quality, price and market share? Does knowledge about objective quality, from Consumer Reports or usage experience, attenuate the effect of advertising spending on perceived quality? Do nondurable goods differ from durable goods in these effects? In ten product categories, ®ve nondurable and ®ve durable, comprising a total of 162 brands, we ®nd that advertising expenditure and perceived quality are generally positively correlated even after accounting for objective quality, price, and market shareÐfor both nondurable goods and durable goods. Objective quality, however, is signi®cantly correlated with perceived quality only for durable goods, after advertising spending, price and market share are accounted for. Finally, previous purchase experience, but not Consumer Reports readership, reduces the effect of advertising spending on perceived quality.