Market-based Assets Research Articles

Marketing Outcomes and Shareholder Value: A Review and Research Agenda

One of the most fundamental management questions is how market-based assets affect shareholder value. To provide an answer, we review the extensive literature on marketing outcomes and shareholder value using the Theory, Context, Characteristics, and Methodology (TCCM) framework. The analysis reveals that researchers mainly rely on the efficient market hypothesis, signaling theory, and market-based arguments to theorize the relationship between customer-based market assets and shareholder value. Researchers predominantly collect secondary data and employ event study, persistence methods, and instrumental variables approach to show that marketing actions (such as advertising and brand building) and customer-based market assets (such as customer satisfaction, customer loyalty, and brand equity) positively influence shareholder value. After outlining the findings, future research directions on the relationship between market assets and shareholder value are explored.

The market-based assets theory of brand competition

Kotler popularised the Segmentation, Targeting, Positioning (STP) theory of brand competition. This theory still dominates marketing textbooks. In this article we show how the discovery of scientific laws concerning how brands compete, grow, and decline clash with the STP theory. The contradiction between these empirical regularities and STP theory has led to the recent emergence of a new market-based asset view of brand competition. We show how this theory fits the now well-established empirical laws, and we discuss some promising areas for future research.

When Do Marketing Ideation Crowdsourcing Contests Create Shareholder Value? The Effect of Contest Design and Marketing Resource Factors

Firms often use crowdsourcing contests to develop marketing ideas and solutions. Despite the prevalence—and unique aspects—of marketing ideation crowdsourcing contests (MICCs), there has been little examination of these contests’ shareholder wealth implications. Adopting a signaling perspective, the authors conduct an event study of 508 MICC announcements and find that they are associated with higher returns, but also higher idiosyncratic risk, indicating that investors hold a mixed view of such contests. Further, the authors consider how contest design factors and firm marketing resources may signal the cultivation of intellectual and relational market-based assets to shape their stock market impact, providing firms guidance to better design their MICCs. Specifically, they find that returns are enhanced when firms use professional (vs. general public) contests, specifically scoped contests, and contests using crowd judging (vs. expert panels), and for firms with stronger marketing capabilities. However, brand factors have mixed effects on returns, with a brand's relevant stature having a positive effect and its energized differentiation having a negative effect on returns. Product MICCs and generally scoped contests heighten the negative effects on risk, whereas marketing resources have no impact. Results offer implications for practitioners, including the finding that many MICC design choices commonly used in practice (i.e., general public contests and expert panels) are viewed less favorably by investors.

Market-based asset valuation of hydrogen geological storage

Because of hydrogen's low energy density, hydrogen storage is a critical component of the hydrogen economy, particularly when large-scale and flexible hydrogen utilization is required. There is a sense of urgency to develop hydrogen geological storage projects to support large-scale yet flexible hydrogen utilization. This study aims to answer questions not yet resolved in the research literature discussing the valuation of hydrogen geological storage options for commercial development. This study establishes a net present value (NPV) evaluation framework for geological hydrogen storage that integrates the updated techno-economic analysis and market-based operations. The capital asset pricing model (CAPM) and the related finance theories are applied to determine the risk-adjusted discount rate in building the NPV evaluation framework. The NPV framework has been applied to two geological hydrogen storage projects, a single-turn storage serving downstream transportation seasonal demand versus a multiturn storage as part of an integrated renewables-based hydrogen energy system providing peak electric load. From the NPV framework, both projects have positive NPVs, $46, 560, 632 and $12, 457, 546, respectively, and International Rate of Return (IRR) values, which are higher than the costs of capital. The NPV framework is also applied to the sensitivity analysis and shows that the hydrogen price spread between withdrawal and injection prices, site development, and well costs are the top three factors that impact both NPV and IRR the most for both projects. The established NPV framework can be used for project risk management by discovering the key cost drivers for the storage assets.

How e-commerce platforms build channel power: the role of AI resources and market-based assets

Purpose Considering the emergence of e-commerce platforms and their integration into marketing channels, this paper aims to investigate how artificial intelligence (AI) resources – both technological and human – possessed by e-commerce platforms can enhance their channel power by acquiring market-based assets (relational and intellectual). Design/methodology/approach Based on resource-based theory and resource orchestration theory, the authors developed a framework tested using survey data gathered from the sellers, which incorporated six key variables: the e-commerce platform’s AI technology resources and human resources, rational and intellectual market-based assets, intraplatform competition and channel power. The analyses are performed using the regression analysis technique. Findings The empirical findings indicate that both technological and human AI resources are crucial in building channel power. In addition, market-based assets serve as a mediator in this relationship, while intraplatform competition moderates the effect of intellectual market-based assets on channel power negatively. Originality/value This study contributes to the existing literature by exploring how e-commerce platforms’ AI resources affect their channel power. The results offer valuable guidance to managers and researchers on optimizing AI resources to improve channel power.

Maximizing customer adoption outcomes in emerging industrial markets via supplier innovativeness and relationship quality

PurposeThis paper aims to examine how suppliers doing business with customers in emerging industrial markets can leverage their innovativeness to foster trust and commitment toward maximizing customer adoption behaviors.Design/methodology/approachBased on commitment-trust theory, this research uses survey data collected from a large sample of Chinese business-to-business executives, which were then analyzed using three-stage least squares simultaneous estimation models and PROCESS.FindingsThe results show that supplier innovativeness can help customers build trust in a supplier. Consequently, a reciprocal commitment is forged among customers that manifest in favorable adoption decisions, including a higher willingness to pay premium prices. Notably, this approach is beneficial when robust interfirm communications are difficult to establish.Originality/valueInnovation decisions in interfirm relationships are important for suppliers doing business in emerging markets. This is because customer adoptions in such settings can foster enduring relational market-based assets and other competitive advantages that can improve supplier performance. Unfortunately, the understanding of how interfirm relationships influence innovation-adoption decisions in emerging markets is lacking. The findings of this research shed light on how suppliers interested in entering emerging markets can interact with customer firms in such settings to maximize favorable adoption outcomes.

Incumbent defense strategies and new entrants market exit: the moderating role of relational market-based assets

PurposeThe purpose of this study is to empirically investigate the impact of incumbents’ defensive strategies, specifically price-cut and capacity expansion, on new entrants’ (NEs) exit decisions and examine the moderating role of incumbents’ relational market-based assets (RMBAs).Design/methodology/approachDrawing upon real options theory, an empirical study using logistic regression is conducted on a rich, multi-market data set of NE exits between 1997 and 2019 in the U.S. airline industry.FindingsContrary to intuitive expectation, the results show that cutting prices in response to entry reduces NEs’ likelihood of market exit. However, when incumbents possess strong RMBAs, using a price cut proves to be effective in pushing NEs out of a market. Moreover, an NEs’ exit likelihood is higher when incumbents expand capacities in response to entry.Research limitations/implicationsIn this study, market exit is defined as a complete withdrawal from the market and operationalized as a binary variable. Future research could examine different degrees of downscaling by NEs while remaining in the market.Practical implicationsThis research demonstrates the opposing effects of price-cut and capacity expansion and the crucial role of RMBAs and advises managers to be cautious and consider trade-offs when implementing their defensive strategies to push NEs out of their markets.Originality/valueThis study contributes to the literature by examining the impact of incumbents’ defensive strategies, price-cut and capacity expansion, side by side and exploring the moderating role of RMBAs. Extant research has focused on antecedents of defensive strategies, whereas the consequences are the focus of this research.

Market-Based Asset Price Probability

Market-Based Asset Price Probability

Cross-border marketing ecosystem orchestration: A conceptualization of its determinants and boundary conditions

The authors propose that the current trends and developments in the international marketplace call for a new theoretical concept-based approach to inform and guide cross-border marketing strategy. Specifically, the authors label this approach marketing ecosystem orchestration (MEO). The marketing ecosystem is defined as connected, interdependent, and co-evolving sets of actors, activities, and institutions enabling the marketing of an offering that has value for customers, clients, partners, and society at large. MEO is a new strategic approach for an internationalizing firm to achieve sustained value creation, value appropriation, and growth in a host market. Orchestration involves developing and/or coordinating the ecosystem’s interdependent – but independent actors, resources, information, processes, and services to create, co-create, and appropriate value from firms’ market-based assets. The authors theorize three components of MEO – the orchestration of supply chains and fulfillment networks, marketing communications, and transactions and payments sub-ecosystems – and develop a conceptual framework and propositions influencing the determinants of MEO adoption by the focal firm. This paper concludes with managerial implications and offers several new directions for international marketing research.

The impact of negative customer engagement on market-based assets and financial performance

Negative customer engagement (NCE) has received little research attention. The effect of NCE on market-based assets (i.e. brand equity) and firm performance remains a particularly underexplored topic despite the increasing rates of NCE with brands across a multitude of service industries. This study develops a comprehensive and parsimonious model of the causes and consequences of NCE. In this study, time-series cross-sectional data from the US airline industry and a simultaneous equation modelling technique were used to provide evidence for why some firms experience more NCE than others. The results indicate that airlines with a higher relative marketing capability (RMC) experience fewer NCE incidents in the form of customer complaints. A firm’s relative marketing capability determines the extent to which its customers engage negatively with it. Furthermore, deviating from earlier studies which explored the direct and immediate relationships between the focal variables, this study theoretically argued and empirically demonstrated that brand equity mediates the nexus between NCE and financial performance. That is, the number of NCE incidents a firm experiences affects its brand equity, which in turn impacts its financial performance, as measured by Tobin’s q and market value added (MVA).

Foreign subsidiaries’ relational strategic emphasis and performance implications amid environmental turbulence

PurposeGrounded in strategic choice and resource-based views, this study aims to investigate the antecedents and consequences of relational strategic emphasis of foreign subsidiaries operating in Thailand. Four types of relational strategies were identified with associated differential performance outcomes.Design/methodology/approachData collected via self-administered surveys from a diverse sample of 168 foreign subsidiaries were analyzed in two stages. First, multinomial logistic regression was used to test whether resource-bridging capability, nonmarket-based assets and market-based assets were significant predictors of relational strategy type. Then, multivariate analysis of variance was used to determine whether the four relational strategy types differed in their strategic performance and financial performance.FindingsThe three resource-based motives are significant predictors of relational strategy. Firms adopting the “dual-relational” strategy tend to have the highest level of resource-bridging capability and nonmarket-based assets while firms pursuing the “business-oriented” strategy are likely to possess a higher level of market-based assets. Extensive reliance on relational ties enables foreign subsidiaries to achieve a much higher level of strategic and financial performance than those that chose to only rely on transactional or contractual relations.Practical implicationsForeign subsidiaries operating in emerging markets characterized by an unstable market environment have to establish good relationships with buyers, suppliers and distributors, as well as government agents.Originality/valueUsing a juxtaposition of political and business ties, a typology of the relational strategy was conceptualized. This study extends non-market strategy research by investigating the relationship between resource and capability in the choice of relational strategy. Diverse degrees of political and business ties show different impacts on strategic and financial performances.

The Chief Marketing Officer: an antidote to myopic earnings management practices

To meet short-term earnings targets, firms often engage in real earnings management practices (REM) such as reducing advertising expenses and running sales promotions. Since these practices can hinder Chief Marketing Officers (CMOs) in building and maintaining market-based assets of firms, the authors hypothesize that firms with CMOs will be less likely to engage in REM. Using publicly available secondary data, the authors show that CMO presence decreases a firm’s propensity for REM and that the CMO’s ability and willingness to deter REM depend on CEO power and market power of the firm, respectively. The authors also conduct a survey of marketing personnel to extend the first study by examining marketing expenditures other than advertising (e.g., market research) and the firm’s revenue management actions (e.g., sales promotions). The authors find that CMO presence reduces the propensity for REM by cutting marketing expenditures but has no impact on REM through sales promotions.

Corporate environmentalism and brand value: A natural resource-based perspective

ABSTRACT Given ever-increasing engagement of firms in corporate environmentalism over the past few decades, a multitude of studies investigated the antecedents and consequences of corporate environmentalism. Extant studies exploring the consequences of corporate environmentalism predominantly measured its effects on firm performance. However, to the best of our knowledge, no study thus far has explored whether or not the key pro-environmental initiatives pertaining to corporate environmentalism carried out by industrial firms have any effect on market-based assets, namely, brand value. This study endeavored to address this gap in the literature. Drawing on natural resource-based view of the firm (NRBV), this study argued that industrial firms committed to corporate environmentalism reap rewards in the form of higher brand value. This study investigated three salient areas of corporate environmentalism, namely, environmental innovation, efficiency in using natural resources and emission reduction. The findings of this research demonstrate that industrial firms that outperform in environmental innovation, use fewer natural resources, and reduce emission have a higher brand value. Interestingly, while environmental innovation and efficiency in using natural resources contribute fairly equally to brand value, ability to reduce emissions contributes the least to brand value creation.

Customer Satisfaction and Firm Profits in Monopolies: A Study of Utilities

There is a growing body of evidence that customer satisfaction is predictive of firms’ future financial performance. However, studies of this relationship have been limited to competitive markets, and monopolistic markets have been largely ignored. This study explores the large and important utilities market and exploits its unique regulatory requirements that generate detailed and reliable operating and accounting data to examine the overall relationship between customer satisfaction and utility profit and establish the causal mechanisms involved. Using data from U.S. public utility firms, the authors show that even when customer satisfaction does not affect future revenues, it does positively predict future profitability by reducing utility firm operating costs. More specifically, they find that higher satisfaction reduces the costs of utility firm distribution, customer service, and sales and general administration expenses. These findings and additional post hoc evidence are consistent with the notion that customer satisfaction (1) generates efficiency-enhancing benefits for utility firms by lowering the direct and employee engagement costs of dealing with dissatisfied customers and (2) fosters greater trust and cooperation from customers. This study has important implications for both managers and regulators and provides important new insights for market-based asset theory and regulatory economic theory.

The economic worth of loyalty programs: An event study analysis

Despite significant research and progress in examining the effects of loyalty programs on consumer behavior and firm performance, the firm value implications of these programs are still unclear. The article investigates whether loyalty program introduction affects firm value, as measured by abnormal stock returns. The authors test the hypotheses empirically by conducting an event study of 260 announcements which cover 110 firms in the United States across different industries for 18 years from 2000 to 2017. Findings reveal that the introduction of loyalty programs, on average, positively influences firm value. The results of this study also reveal the existence of contingencies including synergies with complementary market-based assets and market conditions of lower uncertainty in determining the value of loyalty programs. The authors conclude that the value of loyalty programs is greater when the perceived risks of purchase are lower.

Market-based drivers of cobranding success

This research examines the total value impact of cobranding in new product introductions and how the value is distributed between partners. Analysis of 728 cobranded new products in the consumer electronics and packaged goods industries reveals that cobranding does not always create value for partnering firms. In most cases, any value created is distributed asymmetrically between partners. Consistent with resource dependence theory, we find that relative dependencies of partners’ market-based assets (MAs) significantly drive the variance in cobranding value creation and distribution. MA interdependence such as brand, channel, and capability complementarities leads to higher value creation and lesser value asymmetry. In contrast, MA imbalance in terms of brand, channel, and capabilities between partners results in lower value creation and greater value asymmetry. These effects are more pronounced under high market demand uncertainty and competition. The findings offer useful implications for firms looking to build a successful cobranding strategy.

The Functionality and Comparisons of BSC and Alternative Theories in Organisations: Business Perspective

The purpose of this research is to show the comparison of Resource-based view, Human capital, stakeholder as alternative theories and Balanced Scorecards (BSCs). Resource-Based View (RBV) appears to be limited with narrow implications as the strategic roles. RBV is forced on the internal organisation of a firm and it does not consider the external factors like the demand side of the market. A firm or an organisation may have the resources and the capabilities to gain a competitive advantage but still have no demand. RBV is not explicit on how particular market-based assets and capabilities contribute to generating and sustaining specific form of customer values. Accordingly, Human Capital theory (HC) assumes education increases productivity in the organisation, resulting in higher individual wages, but failed to provide adequate insight into the process through which education training are translated into higher wages. High level of educational attainment and quality may not potentially yield greater productivity and wages across the board. In the same vein, stakeholder theory has no learning and growth perspective required in the 21st century business but provides managers with clear mission and facilitates decision making. Balanced Scorecards (BSCs) has four perspectives: Financial, Customer, Internal development and Learning and growth perspective. It sets priorities by identifying, rationalising and aligning initiatives. The broad aim of this study is to shed light on limitations of these theories. The paper intends to identify future research questions that would help to remove fundamental barriers to pave the way to the company-wide performance in Small Medium Enterprises (SMEs): does BSC or alternative theory add significant value to SMEs? If it does add value, how does it enhance the performance of SMEs in emerging economies?

Customer satisfaction underappreciation: The relation of customer satisfaction to CEO compensation

Customer satisfaction contributes to firm financial performance, but does it contribute to top executives' pay? Our empirical evidence shows that it may not. Customer-satisfying executives tend to have lower pay than their productive peers, even if both satisfaction and productivity contribute to firm financial performance. Thus, customer satisfaction is underappreciated, which may result in both less societal welfare and worse company performance. We propose a board myopia mechanism to account for this phenomenon. In facing short-term financial performance pressure from investors, and the asymmetric information availability between accounting-based and market-based assets for compensation decisions, the board of directors may be myopic, underappreciating executives who invest in market-based assets such as customer satisfaction that drive long-term returns. We examine this satisfaction underappreciation phenomenon empirically using 23 years of panel data that detail firm productivity, customer satisfaction, firm financial performance, and executive compensation. The longitudinal data are analyzed using fixed-effect panel models and a simultaneous system of panel vector autoregression equations with interactions to assess the direct effect of firm financial performance and its carryover effect to executive compensation across executives who are productive, customer-satisfying, or both. The results confirm that customer-satisfying executives are underappreciated: being productive is financially rewarding for both firms and executives, while being customer-satisfying is financially rewarding for firms but not as much for executives. We further demonstrate that using total shareholder returns to benchmark firm financial performance and reward executives with a higher proportion of stock compensation can encourage a long-term focus that alleviates this customer underappreciation.

The Misuse of Accounting-Based Approximations of Tobin’s q in a World of Market-Based Assets

Accounting-based approximations of Tobin’s q (AATQ) are increasingly popular in marketing. AATQ differ from Tobin’s original conception in that they use accounting data to assess the replacement cost of a firm’s assets; the core problem with this is that valuable assets go unrecorded in external reports, including systematic underrecording of market-based assets. This research examines the extensive erroneous claims made about AATQ in marketing studies. We note the widespread use of the metrics and demonstrate that the AATQ used in marketing (1) are not comparable across industries, (2) do not use only tangible assets in their denominator, and (3) should not find equilibrium at 1. AATQ are often described as performance metrics and can respond appropriately to certain types of positive performance. Unfortunately, they also respond positively to performance-neutral strategic choices. Furthermore, whenever AATQ exceed 1, as is typical, they increase even with completely wasted investments. We note that AATQ are especially problematic measures of performance for marketers because they are biased toward reporting that investments in market-based assets (e.g., brand equity and customer satisfaction) are effective. The misuse of AATQ we document suggests the need for marketing scholars to pay greater attention to the theoretical underpinnings of their metrics.

Firm capabilities and performance: a necessary condition analysis

PurposeThe purpose of this paper is to employ a necessary condition analysis (NCA) approach to investigate the level of necessity of two conditions, marketing capability, including responsiveness to customers, responsiveness to competitors, responsiveness to the macro environment, and business relationship quality, and innovativeness capability for firm performance.Design/methodology/approachUsing a survey data set collected from a sample of 311 Vietnamese firms, this study explored the levels of necessity of the components of marketing capability and innovativeness capability by NCA. The study also tested the net effects of these components on firm performance by multiple regression analysis (MRA).FindingsThe MRA results reveal that except for responsiveness to the macro environment, other components of marketing capability and innovativeness capability have positive effects on firm performance. Further, firm size affects performance but industry types do not. The NCA results indicate that these conditions exhibit different levels of necessity for the occurrence of firm performance.Research limitations/implicationsA major limitation of this study is the exploration of necessary levels of only two key firm capabilities, i.e., marketing and innovativeness. Several other capabilities, such as, research and development, operations capabilities, and other market-based assets should be investigated in future research.Practical implicationsThe findings suggest that firms should pay attention not only to the net effects (β weights) but also to the levels of necessity of firm capabilities for their target outcome.Originality/valueThis study is among first studies investigating the levels of necessity of marketing capability and innovativeness capability for firm performance.