Advertising for Long-Term Shareholder Value1
Patrick Barwise
I was asked what I thought about the recession. I thought about it and decided not to take part. Sam Walton, Founder of Wal-Mart2
I will first suggest a general framework for discussing how much to spend on advertising, including when the economy slows down. The proposed framework puts particular emphasis on (i) the distinction between short- and long-term effects and (ii) shareholders likely reaction to a firm increasing, maintaining, or cutting advertising investment. This leads to five financial/economic questions which management should ask about any brand...