VIEWPOINT: ADS WORTH 5% TO PER-SHARE PRICE OF STOCK? HERE'S WHY IT'S SO

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Campbell soup co. announces a new line of ready-to-serve soup sold in glass jars to celebrate its 100th anniversary. Campbell will spend $15 million to advertise the new line. At the same time, the company said that its net income rose 7% in the last quarter and its stock closed at a record high.

Question: How much does Campbell's advertising have to do with its record stock price? Are consumers, who see and read Campbell's ad messages, induced to buy its stock as well as cans (or jars) of its soup, especially as billions of dollars from small investors continue to pour into mutual funds?

My contention is that the emergence of the small investor, in 401(k) plans, mutual funds, as well as on his own, is what's making the stock market fundamentally different. As sophisticated investment analysts wring their hands and worry about a substantial sell-off, small investors are coolly betting that the stock market will race right past 7,000 toward the next record-shattering number. Unlike institutional investors, they don't pull their money out of the market at the first sign of a downturn, much of their funds being tied up in 401(k) plans.

The mutual funds are beginning to realize that brand names sell, and they are cranking up ad campaigns of their own. But, to ask my question again, do Coca-Cola's and Campbell's consumer advertising affect the price of their stock?

After I wrote about this thesis a few weeks ago, I got a letter from Jim Gregory, CEO of an outfit called Corporate Branding Partnership (the company changed its name from Gregory & Clyburne to reflect its work on branding).

Jim says that consumer advertising does affect the company's stock price. He wrote me that he's dedicated a great deal of time and effort to a research study, about to be published by the American Assn. of Advertising Agencies, on advertising and stock performance.

"We know that advertising impacts familiarity and favorability. It also influences nearly all of the important aspects of financial performance, but finding the direct impact on stock performance is the real breakthrough," he wrote. "Setting aside all of the benefits and only focusing on the increased value in stock performance we have been able to find a 5% direct impact. The implications are significant and the return on investment measurable and predictable," Jim asserted. His study covered 220 companies with their brand names in their titles (like Coca-Cola and Campbell) and their corporate names different from their brands.

Jim told me that he and his group "have boiled it down and boiled it down until we've gotten pure maple syrup. The 5% impact figure is so conservative that management has to buy into it. That's what's getting managers' attention. Even if you throw away all the other good feelings and benefits of advertising, it's still worth it when you look at advertising's effect on stock performance."

One of Jim's clients hadn't been putting its corporate name in ads for various consumer products, but now it's considering doing so. He also believes that companies whose corporate name and brand names are the same have a "tremendous advantage" and Corporate Branding is doing a followup study to confirm that

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