Current Issue Summary
Sept 2021 (Vol. 61, Issue 3)

The Effect of Guerilla Marketing on Company Share Prices: An Event Study Analysis
Marketers under pressure to demonstrate how expenditures drive shareholder value will appreciate new findings from Canadian researchers Svetlana Davis (Bishop’s University) and Frederick Davis (Concordia University). The research duo investigate guerilla marketing’s potential impact on a company’s stock price. In the first study of its kind, such campaigns were found to either boost or depress company shares, depending on the form of the appeal (emotion versus rational) and its mix with product types.

Guerilla marketing campaigns—whether viral, grassroots, ambient, sensation or ambush—typically feature innovative, unconventional elements. Their goal: to generate intrigue and to engage. “Not all consumers appreciate surprise and unconventionality, however, and some guerilla marketing activities certainly have backfired,” the researchers write.

“Is guerilla marketing worthwhile for the company?” they ask. By conducting an event study based on earlier models and behavioral research, the authors assessed investor response to guerilla marketing campaigns over four days. Days 1 and 2 accounted for some anticipation or knowledge of the event, due to information leaking or publication delay. Days 3 and 4 allowed for a “reasonable dissemination period in which to capture investor response.” The researchers excluded cases in which multiple other noteworthy company events occurred simultaneously, and they modeled the expected return in the absence of the campaign.

Analyzing a hand-collected sample of 803 guerilla marketing campaigns from 2007 to 2017, with a follow-up, cross-sectional analysis, they found that those that used emotional appeals—particularly associating the brand’s image with joy—generated substantially higher stock-market returns. Humor was the one exception in the emotion category, driving share prices significantly lower. Ditto for rational appeals, particularly claims of high quality.

Takeaways from this study include:

• “The challenge in managing guerilla marketing campaigns thus seems to revolve around invoking positive feelings of joy that are tied to the brand in a memorable way without offsetting consumers with needless humor or untrustworthy claims of superiority.”
• What also matters (supporting previous research) is “when appeals are used with hedonic products, emotional appeals enhance company value, whereas rational appeals detract from it.” But the form of the campaign, whether sensation or ambush or other, is irrelevant.
• Future research should include other dependent variables, such as the number of online views or times the campaign was shared, as well as “how the use of guerrilla marketing might signal to competitors an intention to enter or defend a specific market segment.”

Read the full article here.