The Hierarchy of Effects (HOE) Meets Paid, Earned, and Owned (POE): How Do Internet Media Work to Drive Brand Sales?

in Digital Technologies, Research Day
May 14th, 2012

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Shuba Srinivasan


Authors: Shuba Srinivasan, Koen Pauwels, Randy Bucklin, and Oliver Rutz

The Internet offers marketers new ways to talk to consumers and helps create a space for one’s brand that consumers can easily access and interact with. It also enables firms to monitor consumers’ conversations, attitudes and much more towards a brand. Within this context, we follow industry nomenclature of paid (search and display), owned (websites) and earned (social) media or “POE.” POE media is an important complement to previously relied upon survey-based metrics (i.e., mindset metrics). The new activity-based metrics are behavior-based data in terms of what consumers actually do and offers potentially lower tracking costs and an opportunity for earlier warning. A critical question is how the POE media elements interact with each other and with traditional marketing mix actions such as price, distribution and offline advertising. Our study, to the best of our knowledge, is the first to investigate paid, owned and earned media in an integrated framework that accounts for a hierarchy of effects or “HOE” on brand performance for a fast-moving consumer good. We show to what extent these media contribute to explaining sales as compared to the traditional marketing mix actions of price, distribution, and advertising. We also establish causal relations among traditional and new media metrics and quantify the long-term differential impact of each element of POE media on brand performance. We find that POE metrics can be leading indicators of brand sales and can be used as early warning signals to fine-tune marketing messages before actual declines in sales occur. Overall, our study should help strengthen marketers’ case for building share in customers’ hearts and minds, as measured through customer online engagement. We conclude with implications for academics and brand managers.