The mediating role of market penetration in the relationship between advertising and brand loyalty

Abstract

This study investigates the relationship of three variables: advertising expenditure, market penetration and brand loyalty (at behavioral level). By following the "lawlike" theory about market penetration and brand loyalty, the Double Jeopardy pattern, this study explores how advertising expenditure affects this pattern and what marketers can do to gain long-term profits (gaining more consumers or enhancing loyalty). A mediation function is hypothesized: market penetration is the mediator in the relationship of advertising expenditure (independent variable) and brand loyalty (dependent variable, measured by self-reported "most frequent purchase"). Data was collected from 19,335 respondents in 4 key cities in China. For testing the mediation model, three regressions were estimated: first, regression of mediator on independent variable; second, regression of dependent variable on independent variable; and third, regression of dependent variable on both independent variable and mediator. Finally, the contribution and limits of this study are discussed along with possible future study prospects.