new product introduction and incumbent response strategies their interrelationship and the role of multimarket contact in this article the author studies the determinants of both new product introduction and incumbent response strategies in a single integrated framework building on previous research in strategic

the decomposition of promotional response an empirical generalization price promotions are used extensively in marketing for one simple reason consumers respond the sales increase for a brand on promotion could be due to consumers accelerating their purchases i e buying earlier than usual and or buying more than usual and or consumers switching their choice from other brands purchase acceleration and brand switching relate to the primary demand and secondary demand effects of a promotion gupta 1988 captures these effects in a single model and decomposes a brand s total price elasticity into these components he reports for the coffee product category that the main impact of a price promotion is on brand choice 84 and that there is a smaller impact on purchase incidence 14 and stockpiling 2 in other words the majority of the effect of a promotion is at the secondary level 84 and there is a relatively small primary demand effect 16 this paper reports the decomposition of total price elasticity for 173 brands across 13 different product categories on average we find that 25 of the elasticity is due to primary demand expansion i e purchase acceleration and 75 to secondary demand effects or brand switching thus while gupta s finding that the majority of promotional response stems from brand switching is supported the average magnitude of the effect appears to be smaller than first thought more important there is ample evidence that promotions have a significant primary demand effect the relative emphasis on purchase acceleration and brand switching varies systematically across categories and the second goal of the paper is to explain this variation as a function of exogeneous covariates in doing this we recognize that promotional response is the consumer s reaction to a price promotion and therefore develop a framework for understanding variability in promotional response that is based on the consumer s perspective of the benefits from a price promotion these benefits are posited to be a function of i category specific factors ii brand specific factors and iii consumer characteristics the framework is formalized as a generalized least squares meta analysis in which the brand s price elasticity is the dependent variable several interesting results emerge from this analysis category specific factors brand specific factors and consumer demographics explain a significant amount of the variance in promotional response for a brand at both the primary and secondary demand levels category specific factors have greater influence on variability in promotional response and its decomposition than do brand specific factors there are several instances where exogenous variables do not affect total elasticities yet significantly affect individual components of total elasticity in fact the lack of a significant relationship between the variables and total elasticity is often due to offsetting effects within two or more of the three behavioral components of elasticity this is particularly true for brand specific factors which typically have no effect on total elasticity yet have important effects on the individual behaviors there is some evidence to suggest that not all promotion related increases in primary demand are due to forward buying in some cases promotions appear to increase consumption we use these results to illustrate how category and brand specific factors work to drive primary and secondary demand elasticities in different directions in short this paper offers an empirical generalization of a key finding on promotional response how elasticities decompose across brand choice purchase incidence and stockpiling and new insights into factors that explain variance in promotional response these findings are likely to be of interest to researchers who are concerned with theory development and the generalizability of marketing phenomena and to managers who plan promotion campaigns

brand capital and incumbent firms positions in evolving markets in many advertising intensive industries one observes market share persistence i e firms maintaining lead market shares over long periods of time the author hypothesizes that firms that have the largest stock of well established brands a stock that he terms brand capital are most likely to introduce new products in response to new market information about consumer preferences firms with less brand capital delay their introductions until the uncertainty concerning the market size is reduced the author presents empirical support in a study of new product introductions in the u s beverage industry copyright 1995 by mit press

early marketing matters a time varying parameter approach to persistence modeling are persistent marketing effects most likely to appear right after the introduction of a product the authors give an affirmative answer to this question by developing a model that explicitly reports how persistent and transient marketing effects evolve over time the proposed model provides managers with a valuable tool to evaluate their allocation of marketing expenditures over time an application of the model to many pharmaceutical products estimated through exact initial kalman filtering indicates that both persistent and transient effects occur predominantly immediately after a brand s introduction subsequently the size of the effects declines the authors theoretically and empirically compare their methodology with methodology based on unit root testing and demonstrate that the need for unit root tests creates difficulties in applying conventional persistence modeling the authors recommend that marketing models should either accommodate persistent effects that change over time or be applied to mature brands or limited time windows only

the long term effect of marketing strategy on brand sales few studies have considered the relative role of the integrated marketing mix advertising price promotion product and place on the long term performance of mature brands instead emphasizing advertising and price promotion thus little guidance is available to firms regarding the relative efficacy of their various marketing expenditures over the long run to investigate this issue the authors apply a multivariate dynamic linear transfer function model to five years of advertising and scanner data for 25 product categories and 70 brands in france the findings indicate that the total short term plus long term sales elasticity is 1 37 for product and 74 for distribution conversely the total elasticities for advertising and discounting are only 13 and 04 respectively this result stands in marked contrast to the previous emphasis in the literature on price promotions and advertising the authors further find that the long term effects of discounting are one third the magnitude of the short term effects the ratio is reversed from other aspects of the mix in which long term effects exceed four times the short term effects underscoring the strategic role of these tools in brand sales

marketing models and the lucas critique the lucas critique has been largely ignored in the marketing literature we present a number of conditions under which the critique is most likely to also apply in marketing settings next we provide some perspectives on how to diagnose and accommodate the lucas critique and identify various avenues for future research

seeking commonalities or avoiding differences re conceptualizing distance and its effects on internationalization decisions past research established distance s key influence on internationalization however theoretical issues methodological challenges and inconsistent results hinder scholarship on why distance plays such an influential role to address these problems we draw from cognitive research on similarity comparisons to re conceptualize distance and test a model of internationalization decisions analyzing the verbal protocols of executives considering a series of internationalization opportunities we demonstrate that over and above objective distance indicators considerations that reduce distance commonalities and considerations that augment distance differences have distinct effects on decisions of where when and how to internationalize as such our study contributes new insights for understanding the nature and effects of distance across different dimensions of distance and internationalization decisions moreover internationalization theories have come to emphasize different theoretical rationales for explaining the influential role of distance on different decisions by integrating these rationales together with the notion that distance reducing commonalities and distance augmenting differences have distinct implications for internationalization decisions we introduce the notion that it is not only the addition of distance considerations that matters but also the directionality of such changes doing so our study points to new theoretical and methodological insights to help address prior criticisms and advance future research

fast food consumption and the ban on advertising targeting children the quebec experience abstract amid growing concerns about childhood obesity and the associated health risks several countries are considering banning fast food advertising targeting children in this article the authors study the effect of such a ban in the canadian province of quebec using household expenditure survey data from 1984 to 1992 authors examine whether expenditure on fast food is lower in those groups affected by the ban than in those that are not the authors use a triple difference indifference methodology by appropriately defining treatment and control groups and find that the ban s effectiveness is not a result of the decrease in fast food expenditures per week but rather of the decrease in purchase propensity by 13 per week overall the authors estimate that the ban reduced fast food consumption by us 88 million per year the study suggests that advertising bans can be effective provided media markets do not overlap

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

modeling asymmetric competition the effects of the marketing actions of one brand can be distributed among its competitors market shares in a complex manner this paper presents and illustrates methods for modeling brand competition and brand strategies in markets where competitive effects can be differentially and asymmetrically distributed we discuss the empirical specification parameter estimation and competitive strategy implications of the models proposed price and advertising competition among eleven brands of an australian household product is used to illustrate the application of these procedures

defensive marketing strategies this paper analyzes how a firm should adjust its marketing expenditures and its price to defend its position in an existing market from attack by a competitive new product our focus is to provide usable managerial recommendations on the strategy of response in particular we show that if products can be represented by their position in a multiattribute space consumers are heterogeneous and maximize utility and awareness advertising and distribution can be summarized by response functions then for the profit maximizing firm it is optimal to decrease awareness advertising it is optimal to decrease the distribution budget unless the new product can be kept out of the market a price increase may be optimal and even under the optimal strategy profits decrease as a result of the competitive new product furthermore if the consumer tastes are uniformly distributed across the spectrum a price decrease increases defensive profits it is optimal at the margin to improve product quality in the direction of the defending product s strength and it is optimal at the margin to reposition by advertising in the same direction in addition we provide practical procedures to estimate 1 the distribution of consumer tastes and 2 the position of the new product in perceptual space from sales data and knowledge of the percent of consumers who are aware of the new product and find it available competitive diagnostics such as the angle of attack are introduced to help the defending manager this article was originally published in marketing science volume 2 issue 4 pages 319 360 in 1983

the changing architecture of advertising agencies in contrast to other marketing activities advertising is usually outsourced historically to an integrated full service advertising agency that provides both creative and media services recently major changes have occurred specialized media shops have appeared and large holding companies with several agencies and a separate media shop have emerged this paper describes how firms in the current industry structure choose their agents a theoretical section specifies the firm s decision process in obtaining the creative and media components conditions under which one or both could be effectively produced internally are identified in the prevalent case when these components are outsourced we evaluate whether they can be more efficiently produced by a bundled full service agency or by unbundling to separate agents an empirical section tests the theory implications with cross sectional data on u s firm choices of advertising agents the bundled full service agency is still widely used firms with large advertising budgets unbundle to take advantage of media discounts obtained by market making media shops internal agencies are used when firms have internal creative abilities or have low level requirements in both creative and media the creative and media agencies within holding companies are found to act independently

nonresponse and delayed response to competitive moves the roles of competitor dependence and action irreversibility competitive moves that are unchallenged or to which response is delayed are important weapons in a strategist s arsenal so variables that discourage or delay response are of great interest using

riding the waves revealing the impact of intrayear category demand cycles on advertising and pricing effectiveness abstractgoing beyond traditional seasonality this research introduces the concept of the intrayear category demand cycle this phenomenon reflects demand cycles most consumer packaged goods categories experience throughout the year with periods of higher demand following periods of lower demand the author argues that acknowledging the existence of these cycles and understanding their impact on both advertising and pricing effectiveness and practice is critical for marketers specifically the author demonstrates how both advertising and price elasticities and observed advertising and prices evolve along these cycles for a unique set of 252 brands ranging from high advertising high priced premium mass brands to low advertising low priced value niche brands in 61 consumer packaged goods categories overall both advertising efectiveness and observed advertising are found to be stronger at demand peaks surprisingly consumer reactions to price decreases are weaker at demand peaks whereas reactions

the category demand effects of price promotions although price promotions have increased in both commercial use and quantity of academic research over the last decade most of the attention has been focused on their effects on brand choice and brand sales by contrast little is known about the conditions under which price promotions expand short run and long run category demand even though the benefits of category expansion can be substantial to manufacturers and retailers alike this paper studies the category demand effects of consumer price promotions across 560 consumer product categories over a 4 year period the data describe national sales in dutch supermarkets and cover virtually the entire marketing mix i e prices promotions advertising distribution and new product activity we focus on the estimation of main effects i e the dynamic category expansive impact of price promotions as well as the moderating effects of marketing intensity and competition both conduct and structure on short and long run promotional effectiveness the research design uses modern multivariate time series analysis to disentangle short run and long run effects first we conduct a series of unit root tests to determine whether or not category demand is stationary or evolving over time the results are incorporated in the specification of vector autoregressive models with exogenous variables varx models the impulse response functions derived from these varx models provide estimates of the short and long term effects of price promotions on category demand these estimates in turn are used as dependent variables in a series of second stage regressions that assess the explanatory power of marketing intensity and competition several model validation tests support the robustness of the empirical findings we present our results in the form of empirical generalizations on the main effects of price promotions on category demand in the short and the long run and through statistical tests on how these effects change with marketing intensity and competition the findings generate an overall picture of the power and limitations of consumer price promotions in expanding category demand as follows category demand is found to be predominantly stationary either around a fixed mean or a deterministic trend although the total net short term effects of price promotions are generally strong with an average elasticity of 2 21 and a more conservative median elasticity of 1 75 they rarely exhibit persistent effects instead the effects dissipate over a time period lasting approximately 10 weeks on average and their long term impact is essentially zero by contrast the successful introduction of new products into a category is more frequently associated with a permanent category demand increase several moderating effects on price promotion effectiveness exist more frequent promotions increase their effectiveness but only in the short run the use of nonprice advertising reduces the category demand effects of price promotions both in the short run and in the long run competitive structure matters as well the less oligopolistic the category the smaller the short run effectiveness of price promotions at the same time we find that the dominant form of competitive reaction either in price promotion or in advertising is no reaction short run category demand effectiveness of price promotions is lower in categories experiencing major new product introductions finally both the short and long run price promotion effectiveness is higher in perishable product categories the paper discusses several managerial implications of these empirical findings and suggests various avenues for future research overall we conclude that the power of price promotions lies primarily in the preservation of the status quo in the category

retail price drivers and retailer profits what are the drivers of retailer pricing tactics over time based on multivariate time series analysis of two rich data sets we quantify the relative importance of competitive retailer prices pricing history brand demand wholesale prices and retailer category management considerations as drivers of retail prices interestingly competitive retailer prices account for less than 10 of the over time variation in retail prices instead pricing history wholesale price and brand demand are the main drivers of retail price variation over time moreover the influence of these price drivers on retailer pricing tactics is linked to retailer category margin we find that demand based pricing and category management considerations are associated with higher retailer margins in contrast dependence on pricing history and pricing based on store traffic considerations imply lower retailer margins

when do price thresholds matter in retail categories marketing literature has long recognized that brand price elasticity need not be monotonic and symmetric but has yet to provide generalizable market level insights on threshold based price elasticity asymmetric thresholds and the sign and magnitude of elasticity transitions this paper introduces smooth transition regression models to study threshold based price elasticity of the top 4 brands across 20 fast moving consumer good categories threshold based price elasticity is found for 76 of all brands 29 reflect historical benchmark prices 16 reflect competitive benchmark prices and 31 reflect both types of benchmarks the authors demonstrate asymmetry for gains versus losses on three levels the threshold size and the sign and the magnitude of the elasticity difference interestingly they observe latitude of acceptance for gains compared to the historical benchmark but saturation effects in most other cases moreover category characteristics influence the extent and the nature of threshold based price elasticity while individual brand characteristics impact the size of the price thresholds from a managerial perspective the paper illustrates the sales revenue and margin implications for price changes typically observed in consumer markets

a comment on is having more channels really better a model of competition among commercial television broadcasters this paper shows that the analysis of liu et al 2004 contains a substantive error the asserted pure strategy nash equilibrium leading to their theorems 1 and 2 is really not an equilibrium we show that in their model either pure strategy nash equilibria do not exist or unlike their asserted main result when a pure strategy equilibrium exists increasing the number of commercial television broadcasters does not result in lower quality programs possible modifications of liu et al s model that may help restore the desired result are discussed

the periodicity of pricing abstract retail pricing data combine multiple decisions e g regular pricing and discounting that are possibly made by multiple decision makers e g retailers and manufacturers for example temporary price reductions high frequency price changes can be used to price discriminate in the short run whereas regular price adjustments low frequency price changes might reflect changes in long term costs or demand time disaggregation cannot disentangle these factors because frequency aggregation exists even when data are analyzed at the lowest possible level of temporal aggregation because little is known about the nature of pricing interactions across various planning cycles this article develops several empirical generalizations about the role of periodicity in pricing using week store stockkeeping unit level price data in 35 grocery categories the authors find that 1 cross brand correlation in prices occurs at multiple planning horizons and the planning horizon of the predominant interacti

specifying price judgments with range frequency theory in models of brand choice abstract to construct a price judgment consumers compare a focal price with one or more reference prices however reference price operationalizations in the brand choice literature use single point summary measures that cannot account for several distributional effects to account for effects beyond the first moment of the reference price distribution the authors specify price judgments in models of brand choice in accordance with range frequency theory the findings indicate that range frequency price judgments provide a more complete specification of reference price effects and become more important with an increase in the second and third moments of a reference price distribution the data also indicate that range effects are stronger for coupon users and frequency effects are stronger for consumers exposed to a trend of prices the results have several implications for choice modeling pricing theory and pricing strategy

from the editors common method variance in international business research jibs receives many manuscripts that report findings from analyzing survey data based on same respondent replies this can be problematic since same respondent studies can suffer from common method variance cmv currently authors who submit manuscripts to jibs that appear to suffer from cmv are asked to perform validity checks and resubmit their manuscripts this letter from the editors is designed to outline the current state of best practice for handling cmv in international business research

semiparametric analysis to estimate the deal effect curve abstract the marketing literature suggests several phenomena that may contribute to the nature of the relationship between sales and price discounts these phenomena can produce complex nonlinearities and interactions in the deal effect curve that are best captured with a flexible approach because a fully nonparametric regression model suffers from the curse of dimensionality the authors propose a semiparametric regression model store level sales over time are modeled as a nonparametric function of own and cross item price discounts and a parametric function of other predictors the authors compare the predictive validity of the semiparametric model with that of two parametric benchmark models and obtain superior performance the results for three product categories indicate threshold and saturation effects for both ownand cross item temporary price cuts the authors also find that the nature of the own item curve depends on other items price discounts comparisons with restricted model specification

the relationship between market characteristics and promotional price elasticities many empirical studies in marketing and economics have estimated brand price elasticities for specific products in markets their results indicate that price elasticities seem to differ across brands product categories retail outlets and regions however there has been very little research which examines the factors associated with these observed differences this paper focuses on the promotional price elasticities of established major brands in stable categories it identifies some characteristics of markets which may be associated with differences in price elasticities for frequently purchased nondurables a cross sectional model of the effect of these market characteristics on price elasticities is developed and estimated utilizing own price elasticity estimates for brands at twelve stores the results indicate market characteristics such as brand market share couponing activity display activity and feature activity explain a substantial amount of the variation in promotional price elasticities

structure action and outcomes the dynamics of power in social exchange two levels of power the structure of power in exchange networks and the strategic use of power resources by actors affect the frequency and distribution of exchange outcomes theories of power and exchange suggest alternative hypotheses about how structural power and strategic action are related to each other and to outcomes these are tested with data from a series of experiments in which power relations are based on control over rewards and punishments both structural power and its strategic use have substantial effects on exchange outcomes but structure and action are related only weakly to each other their relative effects on exchange outcomes vary with the base of power structural power has stronger effects on reward exchange and strategic action on punishment exchange the asymmetry of reward exchange in the relation the traditional measure of power use in powerldependence theory is affected by both social scientists have conceptualized power in various ways as a structural potential bierstedt 1950 wrong 1968 emerson 1962 as a process of behavioral or tactical influence rubin and brown 1975 michener and suchner 1972 tedeschi and bonoma 1972 and as the successful outcome of influence dahl 1957 mayhew gray and richardson 1969 simon 1957 i argue that a complete analysis of power must include all three facets understanding the relations among them requires integrating concepts at micro and macro levels of analysis alexander 1987 munch and smelser 1987 the macro level of power is the structure of control that provides the opportunities and constraints within which the micro level of power the strategic behavior of actors operates together structure and action produce outcomes of consequence for actors and relationships i investigate how structure and action affect the amount and distribution of exchange in power dependence relations previous research on power and exchange has studied only the relations between power structure the struc this work was supported by a grant from the national science foundation ses 84 19872 i am

an alternative approach to simulating var models abstract this paper proposes a simple approach to the problem of handling contemporaneous correlation of the error terms when simulating var models the approach is illustrated with an example using an estimated var model of the new zealand economy

editorial does good marketing cause bad unemployment questionable methods for increasing nominal wages reduce real wages i e buying power by creating inflation shortages lower quality and long term unemployment to increase real wages i e the ability to buy more economic principles prescribe increasing productivity i e greater output from less input in contrast marketing principles prescribes increasing the value of output i e greater customer benefits through innovation beyond increasing real wages innovation spawns new occupations better matching individuals with skills and providing greater nonmonetary benefits i e job satisfaction unfortunately threatened entrenched incumbents often solicit protectionist legislation claiming negative externalities e g short term unemployment lower wages and burdens on society innovation does require labor to move from inferior to superior organizations i e unemployment however protectionism only delays and dramatically aggravates the inevitable trauma associated with progress as worker skills firm practices and buyer welfare fall further behind recent attacks demonizing wal mart e g the dubious vlasic pickle claim epitomize this situation they are archaic vanilla protectionism menacing both imperiled consumers and every consumer driven business

action characteristics as predictors of competitive responses a central question in competitive dynamics is whether a competitive response can be predicted this study links various characteristics of actions with the total number and the time lag of competitors responses the hypothesized relationships were tested with a sample of competitive moves among u s airlines the results suggested that responses are influenced by the characteristics of the actions that evoked them specifically the total number of competitors affected by an action and the importance to these competitors of the markets under attack by the action increase the number of competitive responses strategic as opposed to tactical actions or actions which require substantial implementation efforts reduce the number and delay the timing of rivals counteractions finally contrary to prediction competitors who have a high stake in the markets under attack by a competitive move react slowly

a theory of combative advertising in mature markets with competing firms a common role for advertising is to shift consumer preferences towards the advertiser in a tug of war with no effect on category demand in this paper we analyze the effect of such combative advertising on market power we show that depending on the nature of consumer response combative advertising can reduce price competition to benefit competing firms however it can also lead to a procompetitive outcome where individual firms advertise to increase their own profitability but collectively become worse off this is because combative advertising can intensify price competition such that an advertising war leads to a price war similar to price competition advertising competition can result in a prisoner s dilemma where all competing firms make less profit even when the effect of each firm s advertising is to enhance consumer preferences in its favor given such procompetitive effects we further show that cost of combative advertising could be a blessing in disguise higher unit cost of advertising resulting in lower equilibrium levels of advertising leading to higher prices and profits we conduct a laboratory experiment to investigate how combative advertising by competing brands influences consumer preferences our experimental analysis offers strong support for our conclusions

estimating cannibalization rates for pioneering innovations to evaluate the success of a new product managers need to determine how much of its new demand is due to cannibalizing the firm s other products rather than drawing from competition or generating primary demand we introduce a time varying vector error correction model to decompose the base sales of a new product into its constituent sources the model allows managers to estimate cannibalization effects and calculate the new product s net demand which may be considerably less than its total demand we apply our methodology to the introduction of the lexus rx300 using detailed car transaction data this case is especially interesting because the lexus rx300 was the first crossover sport utility vehicle suv implying that its demand could come from both the luxury suv and the luxury sedan categories because lexus was active in both categories there was a double cannibalization potential we show how the contribution of the different demand sources varies over time and discuss the managerial implications for both the focal brand and its competitors

the existence of low end firms may help high end firms two models of competition between high end and low end products benefiting the high end firms are presented one is a quantity competition model and the other is a price competition model with product differentiation the key factor is the existence of two heterogeneous consumer groups those who demand only high end name brand products and those who care little whether products are high or low end we show that under certain conditions the profits of firms in the high end market are larger when there are firms producing low end products than when there are not the existence of price sensitive consumers who care little about product quality intensifies competition among the high end firms the existence of low end firms functions as a credible threat which induces the high end firms not to overproduce because price sensitive consumers buy products from the low end firms the result provides a new theoretical mechanism concerning the profitability and pricing of national brand firms after the entry of private labels it has an implication for pricing and marketing strategies established firms should not decrease their prices after the entry of nonestablished firms

pricing and market concentration in oligopoly markets this paper investigates the relationship between prices and market concentration in the auto rental industry we assemble an original database that includes the number of auto rental operators and other exogenous demand and cost conditions at every commercial airport in the country the data are interesting because we observe a large variation in market structure ranging from more than 100 monopoly and duopoly markets to several competitive airports with more than eight firms in addition we collect daily rental prices in each market that are regressed against the number of operating firms and other control factors due to potential biases in treating market participants as exogenously assigned we employ a two stage estimation procedure in which an equilibrium model of endogenous market structure provides correction terms for the second stage price regression results show that ignoring the endogeneity of market structure severely underestimates the impact of additional competitors on prices with the

do or die competitive effects and red queen dynamics in the product survival race this study explores the reciprocal relationship between the nature and duration of competition and innovation outcomes we propose that the perpetually driven reciprocal sequence of competitive action and reaction known as the red queen in evolutionary biology is a cardinal force behind the success of innovations we test our hypotheses applying a comprehensive data set of all automobile manufacturers known to compete in the us automobile market at any time between 1946 and 2008 using data composed of 8203 model year pairs 1071 models from 148 different brands we find that recent competitive experiences of models rather than those in the distant past make them more viable competitors additionally superior reputation and market share are found to effectively shield models from the pernicious effects of red queen competition

price and advertising effectiveness over the business cycle abstract firms are under increasing pressure to justify their marketing expenditures this evolution toward greater accountability is reinforced in harsh economic times when marketing budgets are among the first to be reconsidered to make such decisions managers must know whether and to what extent marketing s effectiveness varies with the economic tide however surprisingly little research addresses this issue therefore the authors conduct a systematic investigation of the business cycle s impact on the effectiveness of two important marketing instruments price and advertising to do so they estimate time varying short and long term advertising and price elasticities for 150 brands across 36 consumer packaged goods categories using 18 years of monthly u k data from 1993 to 2010 the long term price sensitivity tends to decrease during economic expansions whereas long term advertising elasticities increase during contractions the long term own and cross price elasticities increase moreover

people and machines a look at the evolving relationship between capital and skill in manufacturing 1860 1930 using immigration shocks abstract this paper estimates the elasticity of substitution between capital and skill in manufacturing using immigration induced variation in skill mix across u s counties between 1860 and 1930

commentary defensive marketing strategies for every new product and service entrant there are usually many incumbents who must defend their positions in the market hence defensive strategy is as least as critical as new product strategy our 1983 article argued that defensive strategy critically depends on the distribution of buyer preferences and the position of the new entrant relative to the position of the incumbent in a multidimensional attribute space since the appearance of our 1983 article in marketing science research in defensive strategy has progressed in both prescriptive and descriptive directions subsequent research on defensive strategy has also addressed empirical methodological theoretical and substantive issues today defensive strategy is more important than ever with shorter new product life cycles persistent service innovation remarkable technological change global competition and the invention of new channels of distributions

how dynamic consumer response competitor response company support and company inertia shape long term marketing effectiveness long term marketing effectiveness is a high priority research topic for managers and emerges from the complex interplay among dynamic reactions of several market players this paper introduces restricted policy simulations to distinguish four dynamic forces consumer response competitor response company inertia and company support a rich marketing dataset allows the analysis of price display feature advertising and product line extensions the first finding is that consumer response differs significantly from the net effectiveness of product line extensions price feature and advertising in particular net sales effects are up to five times stronger and longer lasting than consumer response second this difference is not due to competitor response but to company action for tactical actions price and feature it takes the form of inertia as promotions last for several weeks for strategic actions advertising and product line extensions support by other marketing instruments greatly enhances dynamic consumer response this company action negates the postpromotion dip in consumer response and enhances the long term sales benefits of product line extensions feature and advertising therefore managers are urged to evaluate company decision rules for inertia and support when assessing long term marketing effectiveness

informing transforming and persuading disentangling the multiple effects of advertising on brand choice decisions prior behavioral research has suggested that advertising can influence a consumer s quality evaluation through informative and transformative effects the informative effect acts directly to inform a consumer of product attributes and hence shapes her evaluations of brand quality the transformative effect affects the consumer s evaluation of brand quality by enhancing her assessment of her subsequent consumption experience in addition advertising may influence a consumer s utility directly even without providing any explicit information this is the persuasive effect in this paper we propose a framework that formally models the processes through which all three effects of advertisements impact consumers brand evaluations and their subsequent brand choice decisions in particular we model source credibility confirmatory bias and bounded rationality on the part of consumers by appropriately modifying the standard bayesian learning approach our model conforms closely to prior behavioral literature and the experimental findings therein in our empirical analysis we get significant estimates of both informative and transformative effects across brands we find interesting temporal patterns across the effects for instance the importance of transformative effects seem to grow over time while that of informative effects diminishes finally we conduct policy experiments to examine the impact of increased ad intensity on advertising effects as well as the role played by consumption ambiguity

predicting competitive response to a major policy change combining game theoretic and empirical analyses this research uses procter gamble s value pricing initiative as a context for testing whether actual competitor and retailer response to a major policy change can be predicted using a game theoretic model we first estimate demand functions for p g and competitor brands from the period before value pricing was initiated we then formulate a dynamic manufacturer retailer stackelberg model that includes p g a national brand competitor and a retailer the model takes p g s move as given and prescribes the price and promotion response of the competitors and the retailer we substitute the estimated demand parameters into the model to obtain prescriptions for each competitor and the retailer and see whether these prescriptions are related to the actual response we find that the dynamic game theoretic model calibrated with empirical estimates of demand parameters has significant predictive power we also test the predictive power of two benchmark models the first is based on the reaction function approach of leeflang and wittink leeflang peter s h wittink dick r 1992 diagnosing competitive reactions using aggregated scanner data internat j res marketing9 39 57 and the second is a simplification of our dynamic model where the retailer is not strategic the dynamic game theoretic model performs better than either benchmark

competitive reactions to advertising and promotion attacks how do competitors react to each other s price promotion and advertising attacks what are the reasons for the observed reaction behavior we answer these questions by performing a large scale empirical study on the short run and long run reactions to promotion and advertising shocks in over 400 consumer product categories over a four year time span our results clearly show that the most predominant form of competitive response is passive in nature when a reaction does occur it is usually retaliatory in the same instrument i e promotion attacks are countered with promotions and advertising attacks are countered with advertising there are very few long run consequences of any type of reaction behavior by linking reaction behavior to both cross and own effectiveness we further demonstrate that passive behavior is often a sound strategy while firms that do opt to retaliate often use ineffective instruments resulting in spoiled arms accommodating behavior is observed in only a minority of cases and often results in a missed sales opportunity when promotional support is reduced the ultimate impact of most promotion and advertising campaigns depends primarily on the nature of consumer response not the vigilance of competitors

commentaries and rejoinder to measuring the impact of negative demand shocks on car dealer networks by paulo albuquerque and bart j bronnenberg this series of discussions presents commentaries and a rejoinder on strategic and managerial issues arising from albuquerque and bronnenberg albuquerque p b j bronnenberg 2012 measuring the impact of negative demand shocks on car dealer networks marketing sci 31 1 4 23

the long term effects of price promotions on category incidence brand choice and purchase quantity abstract to what extent do price promotions have a long term effect on the components of brand sales namely category incidence brand choice and purchase quantity the authors answer this question by using persistence modeling on weekly sales data of a perishable and a storable product derived from a scanner panel their analysis reveals first that permanent promotion effects are virtually absent for each sales component next the authors develop and apply an impulse response approach to estimate the promotional adjustment period and the total dynamic effects of a price promotion specifically they calculate the long term equivalent of gupta s 1988 14 84 2 breakdown of promotional effects because of positive adjustment effects for incidence but negative adjustment effects for choice the authors find a reversal of the importance of category incidence and brand choice 66 11 23 for the storable product and 58 39 3 for the perishable product the authors discuss the implications of the findings an

winners and losers in a major price war abstract although retail price wars have received much business press and some research attention it is unclear how they affect consumer purchase behavior this article studies an unprecedented price war in dutch grocery retailing that started in fall 2003 initiated by the market leader to halt its sliding market share the authors investigate the short and long term effects of the price war on store visits on spending and on the sensitivity of these decisions to weekly prices and price image they use a unique data set with consumer hand scan and perceptual data for a national panel of 1821 households covering two years before and two years after the price war started although the price war initially entailed more shopping around and increased spending spending per visit ultimately dropped because consumers redistributed their purchases across stores the price war made consumers more sensitive to weekly prices and price image which helped both the chain that showed an improvement in price image

decomposing the sales promotion bump with store data sales promotions generate substantial short term sales increases to determine whether the sales promotion bump is truly beneficial from a managerial perspective we propose a system of store level regression models that decomposes the sales promotion bump into three parts cross brand effects secondary demand cross period effects primary demand borrowed from other time periods and category expansion effects remaining primary demand across four store level scanner datasets we find that each of these three parts contribute about one third on average one extension we propose is the separation of the category expansion effect into cross store and market expansion effects another one is to split the cross item effect total across all other items into cannibalization and between brand effects we also allow for a flexible decomposition by allowing all effects to depend on the feature display support condition and on the magnitude of the price discount the latter dependence is achieved by local polynomial regression we find that feature supported price discounts are strongly associated with cross period effects while display only supported price discounts have especially strong category expansion effects while the role of the category expansion effect tends to increase with higher price discounts the roles of cross brand and cross period effects both tend to decrease

performance regimes and marketing policy shifts even in mature markets managers are expected to improve their brands performance year after year when successful they can expect to continue executing on an established marketing strategy however when the results are disappointing a change or turnaround strategy may be called for to help performance get back on track in such cases performance diagnostics are needed to identify turnarounds and to quantify the role of marketing policy shifts in this process this paper proposes a framework for such a diagnosis and applies several methods to provide converging evidence for two main findings first contrary to prevailing beliefs the performance of brands in mature markets is not always stable instead brands systematically improve or deteriorate their performance outlook in clearly identifiable time windows that are relatively short compared to windows of stability second these shifts in performance regimes are associated with the brand s marketing actions and policy shifts as opposed to competitive marketing promotion oriented marketing policy shifts are particularly potent in improving a brand s performance outlook

the impact of a product harm crisis on marketing effectiveness product harm crises are among a firm s worst nightmares a firm may experience i a loss in baseline sales ii a reduced own effectiveness for its marketing instruments iii an increased cross sensitivity to rival firms marketing mix activities and iv a decreased cross impact of its marketing mix instruments on the sales of competing unaffected brands we find that this quadruple jeopardy materialized in a case study of an australian product harm crisis faced by kraft peanut butter we arrive at this conclusion by using a time varying error correction model that quantifies the consequences of this crisis on base sales and on own and cross brand short and long term effectiveness the proposed modeling approach allows managers to make more informed decisions on how to regain the brands pre crisis performance levels

experiential knowledge and costs in the internationalization process using a behavioral approach this study identifies and delineates components of experiential knowledge in the internationalization process three hypotheses are developed and tested they center around the lack of knowledge in the areas of foreign business foreign institutions and firm internationalization as well as the effect that this lack of knowledge has on managers perceived cost in the internationalization process with the help of a lisrel based structural model the three hypotheses are tested on a sample of 362 service firms the analysis shows that lack of internationalization knowledge has a strong impact on the lack of both business and institutionalization but there is no direct effect of lack of internationalization knowledge on perceived cost of internationalization

moderating factors of immediate gross and net cross brand effects of price promotions this article examines cross price promotional effects in a dynamic context among other things we investigate whether previously established findings hold when consumer and competitive dynamics are taken into account five main influential effects asymmetric price effect neighborhood price effect asymmetric share effect neighborhood share effect and private label versus national brand asymmetry appear jointly in the second layer of a pooled hb vec varx model together with brand and category specific variables this study tests the relative importance of these key factors across three scenarios with no market dynamics when only consumer dynamics are considered and when competitive reactions are also taken into account the results confirm all five influential effects even if they are jointly estimated and consumer and competitive dynamics are taken into account national brand private label asymmetry has the strongest influence on the cross price promotional effects and becomes significantly stronger when consumer and competitive dynamics are taken into account dynamic consumer responses and competitive reactions both affect cross brand price elasticities and contrary to expectations competitive reactions accumulate rather than diminish cross price elasticities preemptive switching does occur i e a brand s promotion in period t hurts a competitor s sales in subsequent periods our findings are based on an extensive data set to attain generalizable results we analyze 33 categories in five stores that is 165 store category combinations

game theory and empirical generalizations concerning competitive promotions this paper offers the generalization that competitive promotions are mixed strategies first an empirical regularity is established that promotions are independent across competitors this regularity is then elaborated on in the context of a promotion game the promotion game is linked to observable outcomes and a classification of possible situations is developed in particular the classification includes the prisoners dilemma battle of the sexes and marketing models of promotion competition the evidence for the generalization comes from a variety of product markets spanning trade promotions retail price reductions and retail promotions such as advertised specials the product markets include coffee baby diapers toilet tissue saltines dishwashing fluid ketchup and detergents among others the data in some cases were from cooperating grocery chains and in others from iri scanner panels the evidence from extant research and from new analyses is presented each situation is identified as be

optimal bidding in multi item multislot sponsored search auctions we study optimal bidding strategies for advertisers in sponsored search auctions in general these auctions are run as variants of second price auctions but have been shown to be incentive incompatible thus advertisers have to be strategic about bidding uncertainty in the decision making environment budget constraints and the presence of a large portfolio of keywords makes the bid optimization problem nontrivial we present an analytical model to compute the optimal bids for keywords in an advertiser s portfolio to validate our approach we estimate the parameters of the model using data from an advertiser s sponsored search campaign and use the bids proposed by the model in a field experiment the results of the field implementation show that the proposed bidding technique is very effective in practice we extend our model to account for interactions between keywords in the form of positive spillovers from generic keywords into branded keywords the spillovers are estimated using a dynamic linear