A Comparison of Excess Stock Market Return to Standard Marketing Metrics

Abstract

Marketing metrics provide measures of the impact of various marketing strategies. This paper examines excess stock market return as a potential measure to include in the metric arsenal. Excess stock return reflects investors' views of the likely impact of a particular strategy. Investors form expectations about how the strategy will affect future cash flows. Consequently, a stock's price changes to reflect investor “votes” about the strategy's impact on firm value. By tapping into event study techniques for measuring the impact of an announcement, firms can better understand the value of a particular marketing strategy. An assessment of various marketing measures indicates that excess stock market return compares favorably to other metrics. Excess return yields unbiased estimates, allows direct causal inference, is future oriented, includes all cash flows, accounts for opportunity costs, factors in risk, and takes into account the time value of money.