• Subscribe to our newsletter
The Media Online
  • Home
  • MOST Awards
  • News
    • Awards
    • Media Mecca
  • Print
    • Newspapers
    • Magazines
    • Publishing
  • Broadcasting
    • TV
    • Radio
    • Cinema
    • Video
  • Digital
    • Mobile
    • Online
  • Agencies
    • Advertising
    • Media agency
    • Public Relations
  • OOH
    • Events
  • Research & Education
    • Research
    • Media Education
      • Media Mentor
  • Press Office
    • Press Office
    • TMO.Live Blog
    • Events
    • Jobs
No Result
View All Result
  • Home
  • MOST Awards
  • News
    • Awards
    • Media Mecca
  • Print
    • Newspapers
    • Magazines
    • Publishing
  • Broadcasting
    • TV
    • Radio
    • Cinema
    • Video
  • Digital
    • Mobile
    • Online
  • Agencies
    • Advertising
    • Media agency
    • Public Relations
  • OOH
    • Events
  • Research & Education
    • Research
    • Media Education
      • Media Mentor
  • Press Office
    • Press Office
    • TMO.Live Blog
    • Events
    • Jobs
No Result
View All Result
The Media Online
No Result
View All Result
Home Advertising

Cutting marketing spending often backfires on businesses

New research could help investors distinguish shortsighted cuts from smart ones.

by Andre Martin
August 26, 2024
in Advertising
0 0
0
Crossing the content divide

Clients need advertising budgets to work harder than ever before.

Share on FacebookShare on Twitter

Businesses are often tempted to cut their marketing budgets for the short-term savings it provides – but those cuts can cause problems in the long term.

A new study my colleague Tarun Kushwaha and I published in The Journal of Marketing proposes a method for predicting whether these counterproductive cuts will take place up to a year in advance.

We gathered transcripts of nearly 25000 earnings calls held by public companies from 2008 to 2019. We then analyzed how management teams discussed marketing and earnings.

We found that the more earnings-oriented language was in a call — think words like “lucrative” or “revenues” — the more likely a management team was to cut their marketing budget for a boost in earnings.

Unlike business-as-usual budget shifts, the motive in these cases was to raise short-term earnings to gain personal profits – for example, to boost stock prices before an executive retires – to raise immediate funds, or to satisfy investor pressure and expectations.

These cuts in exchange for a bump in earnings are shortsighted, since investing in marketing tends to grow a company’s market share over time.

Why it matters

Executives often feel pressured to meet short-term earnings targets at the expense of long-term goals, survey data and research have shown. Cutting costs is one way businesses make themselves look better in the short term. And since investing in marketing takes time to pay off, marketing spending often winds up on the chopping block.

My fellow marketing professors call these “myopic” marketing spending decisions – “myopic” being a fancy word for shortsighted. They often happen before initial public offerings, share repurchases and executive retirements.

While these myopic decisions have short-term benefits, they harm investors, customers and other stakeholders in the long term. After companies myopically cut marketing spending, they often lose market value; that’s why such cuts are linked with worse stock-market performance in the long run.

A tool that helps investors identify myopic marketing spending would help them protect their portfolios from negative long-term consequences.

Our method isn’t just backward-looking – it can be used to forecast future shortsighted cuts to marketing spending. Investors could use it to analyse publicly available earnings-calls transcripts for useful data up to four times a year.

We estimate that for every $100 invested, using our method to avoid investing in shortsighted companies could return an additional $6.44 over four years compared with conventional methods. Marketing firms and advertising agencies could also use it to identify companies that plan to pare their marketing budgets.

What’s next

As part of our research efforts, my team has published the algorithm and data necessary to replicate our findings. This will let individual investors and other stakeholders gain valuable insights into executives’ intentions regarding the funding of their marketing and research departments.

While our research has primarily focused on transcribed text from earnings calls, we see more potential in analysing the audio and video from these calls.

Audio analysis could reveal insights from tone, pitch, pauses and filler words, while video analysis could capture the brief involuntary facial expressions known as micro-expressions.

The Research Brief is a short take on interesting academic work.The Conversation


Andre Martin, Assistant Professor of Marketing, University of Notre Dame

This article is republished from The Conversation under a Creative Commons license. Read the original article.


 

Tags: advertisingAndre Martinmarketingmarketing researchmediaresearchThe Conversationtool

Andre Martin

Andre Martin loves to solve problems. Before completing a marketing Ph.D. at the Kenan-Flagler Business School at the University of North Carolina, he worked for Xerox and defense contractor SRC Inc. for 15 years as a software engineer and program manager. He holds a bachelor’s degree in computer science and a master’s degree in electrical engineering. His passion for problem-solving, software training, and industry experience positions him to answer business questions using novel machine-learning techniques. His quantitative marketing strategy research has real-world implications and focuses on the downstream effects of firm communication. Substantively his research focuses on marketing strategy around privacy and the marketing-finance interface. Methodologically his interests lie in time series and panel data analysis, NLP (natural language processing), and machine learning.

Follow Us

  • twitter
  • threads
  • Trending
  • Comments
  • Latest
Kelders van Geheime: The characters are here

Kelders van Geheime: The characters are here

March 22, 2024
Dissecting the LSM 7-10 market

Dissecting the LSM 7-10 market

May 17, 2023
Keri Miller sets the record straight after being axed from ECR

Keri Miller sets the record straight after being axed from ECR

April 23, 2023
Getting to know the ES SEMs 8-10 (Part 1)

Getting to know the ES SEMs 8-10 (Part 1)

February 22, 2018
Sowetan proves that sex still sells

Sowetan proves that sex still sells

105
It’s black. It’s beautiful. It’s ours.

Exclusive: Haffajee draws a line in the sand over racism

98
The Property Magazine and Media Nova go supernova

The Property Magazine and Media Nova go supernova

44
Warrant of arrest authorised for Media Nova’s Vaughan

Warrant of arrest authorised for Media Nova’s Vaughan

41
AI in sponsorship: Beyond the buzzword

AI in sponsorship: Beyond the buzzword

May 9, 2025
Upping the ante: Tracking the year-on-year growth of gambling in SA

Upping the ante: Tracking the year-on-year growth of gambling in SA

May 9, 2025
Seven Days on Social Media: Tonya’s in hospital, the nation’s in chaos and SA doesn’t care about Joshlin

Seven Days on Social Media: Tonya’s in hospital, the nation’s in chaos and SA doesn’t care about Joshlin

May 9, 2025
Social media platforms are replacing Google

Social media platforms are replacing Google

May 8, 2025

Recent News

AI in sponsorship: Beyond the buzzword

AI in sponsorship: Beyond the buzzword

May 9, 2025
Upping the ante: Tracking the year-on-year growth of gambling in SA

Upping the ante: Tracking the year-on-year growth of gambling in SA

May 9, 2025
Seven Days on Social Media: Tonya’s in hospital, the nation’s in chaos and SA doesn’t care about Joshlin

Seven Days on Social Media: Tonya’s in hospital, the nation’s in chaos and SA doesn’t care about Joshlin

May 9, 2025
Social media platforms are replacing Google

Social media platforms are replacing Google

May 8, 2025

ABOUT US

The Media Online is the definitive online point of reference for South Africa’s media industry offering relevant, focused and topical news on the media sector. We deliver up-to-date industry insights, guest columns, case studies, content from local and global contributors, news, views and interviews on a daily basis as well as providing an online home for The Media magazine’s content, which is posted on a monthly basis.

Follow Us

  • twitter
  • threads

ARENA HOLDING

Editor: Glenda Nevill
glenda.nevill@cybersmart.co.za
Sales and Advertising:
Tarin-Lee Watts
wattst@arena.africa
Download our rate card

OUR NETWORK

TimesLIVE
Sunday Times
SowetanLIVE
BusinessLIVE
Business Day
Financial Mail
HeraldLIVE
DispatchLIVE
Wanted Online
SA Home Owner
Business Media MAGS
Arena Events

NEWSLETTER SUBSCRIPTION

 
Subscribe
  • About
  • Advertise
  • Privacy & Policy
  • Contact

Copyright © 2015 - 2023 The Media Online. All rights reserved. Part of Arena Holdings (Pty) Ltd

No Result
View All Result
  • Home
  • MOST Awards
  • News
    • Awards
    • Media Mecca
  • Print
    • Newspapers
    • Magazines
    • Publishing
  • Broadcasting
    • TV
    • Radio
    • Cinema
    • Video
  • Digital
    • Mobile
    • Online
  • Agencies
    • Advertising
    • Media agency
    • Public Relations
  • OOH
    • Events
  • Research & Education
    • Research
    • Media Education
      • Media Mentor
  • Press Office
    • Press Office
    • TMO.Live Blog
    • Events
    • Jobs

Copyright © 2015 - 2023 The Media Online. All rights reserved. Part of Arena Holdings (Pty) Ltd

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?