Determinants of Brand Advertising Efficiency: Evidence from the German Car Market

Abstract

How inefficient is brand advertising in the German car industry and what are the determinants of advertising inefficiency? In a first step, the brand advertising efficiency of 35 car brands in the German car industry is measured. Data envelopment analysis (DEA) is applied to a multiple input-output model of advertising. The analysis reveals that, on average, 8% of a brand's advertising budget is wasted. In a second step, a model identifying the determinants of brand advertising inefficiency is developed and tested empirically. The results indicate that advertising efficiency is positively related to purchase event feedback and the size of the brand product portfolio. The implications and possible areas of future research are discussed.