managing advertising and promotion for long run profitability in recent years manufacturers have become increasingly disposed toward the use of sales promotions often at the cost of advertising yet the long term implications of these changes for brand profitability remain unclear in this paper we seek to offer insights into this important issue we consider the questions of i whether it is more desirable to ad vertise or promote ii whether it is better to use frequent shallow promotions or infrequent deep promotions and iii how changes in regular prices affect sales relative to increases in price promotions additional insights regarding brand equity the relative magnitude of short and long term effects and the decomposition of advertising and promotion elasticities across choice and quantity decisions are obtained to address these points we develop a heteroscedastic varying parameter joint probit choice and regression quantity model our approach allows consumers responses to short term marketing activities to change in response to changes in marketing actions over the long term we also accommodate the possibility of competitive reactions to policy changes of a brand the model is estimated for a consumer packaged good category by using over eight years of panel data the resulting parameters enable us to assess the effects of changes in advertising and promotion policies on sales and profits our results show that in the long term advertising has a positive effect on brand equity while promotions have a negative effect furthermore we find price promotion elasticities to be larger than regular price elasticities in the short term but smaller than regular price elasticities when long term effects are considered consistent with previous research we also find that most of the effect of a price cut is manifested in consumers brand choice decisions in the short term but when long term effects are again considered this result no longer holds last we estimate that the long term effects of promotions on sales are negative overall and about two fifths the magnitude of the positive short term effects finally making reasonable cost and margin assumptions we conduct simulations to assess the relative profit impact of long term changes in pricing advertising or promotion policies our results show regular price decreases to have a generally negative effect on the long term profits of brands advertising to be profitable for two of the brands and increases in price promotions to be uniformly unprofitable

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

asymmetric and neighborhood cross price effects some empirical generalizations this paper provides some empirical generalizations regarding how the relative prices of competing brands affect the cross price effects among them particular focus is on the asymmetric price effect and the neighborhood price effect the asymmetric price effect states that a price promotion by a higher priced brand affects the market share of a lower priced brand more so than the reverse the neighborhood price effect states that brands that are closer to each other in price have larger cross price effects than brands that are priced farther apart the main objective of this paper is to test if these two effects are generalizable across product categories and to assess which of these two effects is stronger while the neighborhood price effect has not been rigorously tested in past research the asymmetric price effect has been validated by several researchers however these tests of asymmetric price effect have predominantly used elasticity as the measure of cross price effect the cross price elasticity measures the percentage change in market share or sales of a brand for 1 change in price of a competing brand we show that asymmetries in cross price elasticities tend to favor the higher priced brand simply because of scaling effects due to considering percentage changes furthermore several researchers have used logit models to infer asymmetric patterns we also show that inferring asymmetries from conventional logit models is incorrect to account for potential scaling effects we consider the absolute cross price effect defined as the change in market share percentage points of a target brand when a competing brand s price changes by one percent of the product category price the advantage of this measure is that it is dimensionless hence comparable across categories and it avoids scaling effects we show that in the logit model with arbitrary heterogeneity in brand preferences and price sensitivities the absolute cross price effect is symmetric we develop an econometric model for simultaneously estimating the asymmetric and neighborhood price effects and assess their relative strengths we also estimate two alternate models that address the following questions i if i were managing the ith highest priced brand which brand do i impact the most by discounting and which brand hurts me the most through price discounts ii who hurts whom in national brand vs store brand competition based on a meta analysis of 1 060 cross price effects on 280 brands from 19 different grocery product categories we provide the following empirical generalizations 1 the asymmetric price effect holds with cross price elasticities but tends to disappear with absolute cross price effects 2 the neighborhood price effect holds with both cross price elasticities and absolute cross price effects and is significantly stronger than the asymmetric price effect on both measures of cross price effects 3 a brand is affected the most by discounts of its immediately higher priced brand followed closely by discounts of its immediately lower priced brand 4 national brands impact store brands more so than the reverse when the cross effect is measured in elasticities but the asymmetric effect does not hold with absolute effects store brands hurt and are in turn hurt the most by the lower priced national brands that are adjacent in price to the store brands 5 cross price effects are greater when there are fewer competing brands in the product category and among brands in nonfood household products than among brands in food products the implications of these findings are discussed

why capital suppliers usually hire workers what we know and what we need to know abstract a fundamental question for economics is why large firms in market economies usually assign control rights to capital suppliers rather than labor suppliers a diverse collection of answers can be found in the literature but unfortunately little theoretical consensus has emerged and few attempts have been made to resolve this issue through systematic empirical investigation this paper reviews a number of different hypotheses clustering around work incentives the financing of firms and collective choice we identify the strengths and weaknesses of each approach filling in theoretical gaps where necessary and conclude with some suggestions for empirical research

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

toward a reconciliation of market power and information theories of advertising effects on price elasticity prior work on the economic effects of advertising has presented conflicting views some authors have suggested that advertising creates market power by artificially differentiating brands and thereby lowering price elasticity others have viewed advertising as an efficient source of information about the existence of substitutes arguing that advertising increases price elasticity the present research proposes a unifying theoretical model in which advertising affects price elasticity through its influence on two mediating constructs the size of the consideration set and the relative strength of preference pretests 1 and 2 examine the effects of advertising on these two constructs results from the main experiment show that in accordance with the theoretical framework the same advertisements that increased price elasticity in some decision environments decreased it in others

empirical generalizations about the impact of advertising on price sensitivity and price consumers sensitivities to price changes are an important input to strategic and tactical decisions it has been argued that price sensitivities depend on factors such as advertising prior studies on the effect of advertising on consumer price sensitivity have found seemingly conflicting results we analyze the characteristics of previous studies in marketing and generate a set of three empirical generalizations these are 1 an increase in price advertising leads to higher price sensitivity among consumers 2 the use of price advertising leads to lower prices and 3 an increase in nonprice advertising leads to lower price sensitivity among consumers these generalizations have important implications for managers and researchers managers need to coordinate their advertising and pricing decisions to attain maximum profits for researchers our summary and discussion of empirical results provide directions for future

the dynamic effect of discounting on sales empirical analysis and normative pricing implications baseline sales measure what retail sales would be in the absence of a promotion abraham and lodish 1993 and models that measure baseline sales are widely used by managers to assess the profitability of promotions bucklin and gupta 1999 this issue estimates of baseline sales and promotional response are typically independent of past promotional activity even though there is evidence to suggest that increased discounting reduces off promotion sales and increases the percentage of purchases made on deal e g krishna 1994 as a result models that do not consider dynamic promotional effects can mislead managers to overpromote given the widespread use of static models to evaluate the efficacy of promotions it is particularly desirable to calibrate a dynamic brand sales model and use it to establish an optimal course of action accordingly we develop a descriptive dynamic brand sales model and use it to determine normative price promotion strategies our descriptive approach consists of estimating a varying parameter sales response model letting model parameters vary with past discounting activity accommodates the possibility that market response changes with firms discounting policies in the normative model we use the estimates obtained in the descriptive model to determine optimal retailer and manufacturer prices over time the results of the descriptive model indicate that promotions have positive contemporaneous effects on sales accompanied by negative future effects on baseline sales the results of the normative model suggest that the higher share brands in our data tend to overpromote while the lower share brands do not promote frequently enough we project that the use of our model could improve manufacturers profits by as much as 7 to 31 more generally the normative results indicate that i if deals become more effective in the current period i e if consumers are more price sensitive promotions should be used more frequently and ii as the negative dynamic effect of discounts on sales increases the optimal level of discounting should go down without our approach it would be difficult to make this trade off exact finally we demonstrate that these dynamic effects provide another perspective to the marketing literature regarding the existence of promotions

the persistence of marketing effects on sales are marketing efforts able to affect long term trends in sales or other performance measures answering this question is essential for the creation of marketing strategies that deliver a sustainable competitive advantage this paper introduces persistence modeling to derive long term marketing effectiveness from time series observations on sales and marketing expenditures first we use unit root tests to determine whether sales are stable or evolving trending over time if they are evolving we examine how strong this evolution is univariate persistence and to what extent it can be related to marketing activity multivariate persistence an empirical example on sales and media spending for a chain of home improvement stores reveals that some but not all advertising has strong trend setting effects on sales we argue that traditional modeling approaches would not pick up these effects and therefore seriously underestimate the long term effectiveness of advertising the paper concludes with an agenda for future empirical research on long run marketing effectiveness

marketing budget allocation across countries the role of international business cycles a key conundrum facing organizations is how to adjust marketing budgets in response to the business cycle while most firms use procyclical spending spending less during economic contractions academic studies often recommend countercyclical spending spending more during contractions which begs the following question what is the right thing to do the spending problem is compounded further when demand is not just driven by one country s business cycle but by the nonsynchronized business cycles of multiple countries as is the case for tourism marketing aiming to attract tourists originating from different countries we derive insights into the best way to allocate marketing budgets across countries under varying economic conditions we show that the allocation decisions are driven by the procyclical versus countercyclical nature of three factors unit sales marketing effectiveness and per unit profit contribution to study how unit sales and marketing effectiveness respond to the business cycle

the life cycle of worker owned firms in market economies a theoretical analysis abstract the population of worker owned firms is likely to grow countercyclically in contrast with capitalist firms many worker owned firms are born during recessions frequently out of capitalist firms and are transformed into capitalist firms during economic booms there exists an offsetting tendency as worker owned firms are formed during periods of sustained increase in the standard of living and are dissolved during economic decline these are some of the conclusions of a theoretical analysis of the obstacles to the formation and relative efficiency attributes of worker owned and capitalist firms carried out in a dynamic framework emphasizing the influence of changes in the environment on organizational life cycles

will it ever fly modeling the takeoff of really new consumer durables a consistent pattern observed for really new household consumer durables is a takeoff or dramatic increase in sales early in their history the takeoff tends to appear as an elbow shaped discontinuity in the sales curve showing an average sales increase of over 400 in contrast most marketing textbooks as well as diffusion models generally depict the growth of new consumer durables as a smooth sales curve our discussions with managers indicate that they have little idea about the takeoff and its associated characteristics many managers did not even know that most successful new consumer durables had a distinct takeoff their sales forecasts tend to show linear growth yet knowledge about the takeoff is crucial for managers to decide whether to maintain increase or withdraw support of new products it is equally important for industry analysts who advise investors and manufacturers of complementary and substitute products although previous studies have urged researchers to examine the takeoff no research has addressed this critical event while diffusion models are commonly used to study new product sales growth they do not explicitly consider a new product s takeoff in sales indeed diffusion researchers frequently use data only from the point of takeoff therefore nothing is known about the takeoff or models appropriate for this event our study provides the first analysis of the takeoff in particular we address three key questions i how much time does a newly introduced product need to takeoff ii does the takeoff have any systematic patterns iii can we predict the takeoff we begin our study by developing an operational measure to determine when the takeoff occurs we found that when the base level of sales is small a relatively large percentage increase could occur without signaling the takeoff conversely when the base level of sales is large the takeoff sometimes occurs with a relatively small percentage increase in sales therefore we developed a threshold for takeoff this is a plot of percentage sales growth relative to a base level of sales common across all categories we define the takeoff as the first year in which an individual category s growth rate relative to base sales crosses this threshold the threshold measure correctly identifies the takeoff in over 90 of our categories we model the takeoff with a hazard model because of its advantages for analyzing time based events we consider three primary independent variables price year of introduction and market penetration as well as several control variables the hazard model fits the pattern of takeoffs very well with price and market penetration being strong correlates of takeoff our results provide potential generalizations about the time to takeoff and the price reduction nominal price and penetration at takeoff in particular we found that on average for 16 post world war ii categories the price at takeoff is 63 of the introductory price the time to takeoff from introduction is six years the penetration at takeoff is 1 7 the time to takeoff is decreasing for more recent categories for example the time to takeoff is 18 years for categories introduced before world war ii but only six years for those introduced after world war ii many of the products in our sample had a takeoff near three specific price points in nominal dollars 1000 500 and 100 in addition we show how the hazard model can be used to predict the takeoff the model predicts takeoff one year ahead with an expected average error of 1 2 years it predicts takeoff at a product s introduction with an expected average error of 1 9 years even against the simple mean time to takeoff of six years for recent categories the model s performance represents a tremendous improvement in prediction it represents an immeasurable improvement in prediction for managers who currently have no idea about how long it takes for a new product to takeoff the threshold rule for determining takeoff can be used to distinguish between a large increase in sales and a real takeoff some limitations of this study could provide fruitful areas for future research our independent variables suffer from endogeneity bias so alternative variables or methods could address this limitation also the takeoff may be related to additional variables such as relative advantage over substitutes and the presence of complementary products finally examination of sales from takeoff to their leveling off could be done with an integrated model of takeoff and sales growth or with the hazard model we propose generalizations about this period of sales growth could also be of tremendous importance to managers of new products

cointegration analysis of the advertising sales relationship the examination of stochastic properties of the annual advertising and sales data from the lydia pinkham company reveals that the series are cointegrated and therefore possess a long run equilibrium condition according to the estimates of the error correction model of the series in the short run advertising is found to be more responsive than sales in adjustments to eliminate departures from the long run equilibrium condition the author s analysis in general implies that the observed business firms decision rules fixing advertising spending as a percentage of sales revenue may hold as a long run equilibrium condition copyright 1991 by blackwell publishing ltd

new empirical generalizations on the determinants of price elasticity abstract the importance of pricing decisions for firms has fueled an extensive stream of research on price elasticities in an influential meta analytical study tellis 1988 summarized price elasticity research findings until 1986 however empirical generalizations on price elasticity require modifications because of 1 changes in market characteristics i e characteristics of brands product categories and economic conditions and 2 changes in the research methodology used to assess price elasticities therefore the authors present a meta analysis of price elasticity with new empirical generalizations on its determinants across a set of 1851 price elasticities based on 81 studies the average price elasticity is 2 62 a salient finding is that over the past four decades sales elasticities have significantly increased in magnitude whereas share and choice elasticities have remained fairly constant the authors find that accommodating price endogeneity has a strong magnitude increasing impa

multinational firms and the theory of international trade and investment tinational corporation in the arena of economic activity and political influence trade theorists have either ignored it or expressed unguarded skepticism at the ability of the conventional trade models to successfully capture and analyze the features of this new phenomenon the purpose of this paper is twofold first by building upon the contribution by richard caves we will show that the traditional trade models can be adapted in a way that preserves most if not all of the attributes introduced by international firms 2 second we will conduct a comparative statics analysis to explore the implications of tariffs and taxes for resource allocation and international capital movements our results here confirm what has already been well established in myriad empirical studies that maturation of the international firm has vastly increased economic interdependence among trading countries and that few nations can eschew the ripples caused by economic policies of other nations 3

cooperative firms in hard times this paper develops a simple principal agent model to determine the occupational choice of some individuals between entering the labor market as workers and setting up a labor managed firm the start up requires external credit which is provided by a monopolistic lender we show that the occupational choice depends on both the reservation utility of workers and the loan profitability of the bank

why is labour managed firm entry so rare an analysis of uk manufacturing data abstract why are there so few labour managed entrants in market economies we address this question by analysing a panel of labour managed entrants into uk manufacturing industries using poisson and negative binomial random effects models our main finding is a significant negative relationship between entry counts and both the capital labour ratio and the variance of profits this is consistent with long standing theoretical arguments that labour managed firms face problems in raising capital and spreading risk

generalizing what is known about temporal aggregation and advertising carryover this paper provides a theoretical explanation for the inconsistent findings from previous econometric analyses of aggregated data concerning the duration of advertising carryover using this theoretical explanation and the knowledge of a data interval bias the paper reviews and summarizes the empirical work in the area of sales response modeling and then after adjusting for aggregation bias presents support for an empirical generalization that the average advertising duration interval is of brief duration typically between six and nine months

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

a hierarchical bayes error correction model to explain dynamic effects of price changes abstract the authors put forth a sales response model to explain the differences in immediate and dynamic effects of promotional prices and regular prices on sales the model consists of a vector autoregression that is rewritten in error correction format which allows the authors to disentangle the immediate effects from the dynamic effects in a second level of the model the immediate price elasticities the cumulative promotional price elasticity and the long term regular price elasticity are correlated with various brand specific and category specific characteristics the model is applied to seven years of data on weekly sales of 100 different brands in 25 product categories the authors find many significant moderating effects on the elasticity of price promotions brands in categories that are characterized by high price differentiation and that constitute a lower share of budget are less sensitive to price discounts deep price discounts increase the immediate price sensitivity of customers the

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

minimum wage increase and firm productivity evidence from the restaurant industry abstract the purpose of this paper is to examine the effects of increasing the federal minimum wage on productivity in the restaurant industry based on the equity theory and fair wage hypothesis this study empirically investigated the relationship between the federal minimum wage and restaurant productivity the results revealed that increasing the federal minimum wage immediately enhances restaurant productivity for up to two years the results further indicated that both full service restaurants and low wage restaurants benefit from the positive effect while there is no significant effect on limited service restaurants and high wage restaurants the results suggest that restaurants should cope with minimum wage policies by focusing on implementing initiatives that can maximize enhanced work efforts and productivity more importantly the results further highlight that restaurants should consider either continuously raising wage levels or raising them every two years to consistently obtain enhanced motivation and productivity

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

modeling heterogeneity and state dependence in consumer choice behavior in frequently purchased consumer goods markets consumer brand choices exhibit substantial persistence across purchase occasions in this article i estimate a choice model that admits of both heterogeneity in preferences and true state dependence as sources of this persistence using nielsen scanner data on ketchup i find evidence for true state dependence in the choice process even after controlling for a rich heterogeneity structure simulation of the model indicates that the long term effect of a promotion induced purchase on future purchase probabilities is positive but small

perverse intra firm trade this paper shows that linkages between domestic costs and direction of intra firm trade break down when the multinational firms mnfs face tax rate differentials thus in the context of mnfs conclusions drawn on the assumption of equal or nonexistent tax rates cannot be assumed to extend to the general case of unequal tax rates further saving on profit taxes itself can be a powerful motive for internalisation

response to competitive entry a rationale for delayed defensive reaction empirical studies examining responses to new product entries come to the puzzling conclusion that in general an incumbent reacts to a new entrant after a significant delay even easy to implement price cuts are observed after significant lag following entry these findings seem to contradict the existing literature that either implicitly assumes or strongly advocates immediate defensive responses to limit competitive encroachment when a competing firm enters the market consumers may be uncertain about the entering firm s product quality the incumbent firm through rigorous tests may fully know the entrant s quality suppose the incumbent aggressively lowers price this may cause the consumers to wonder if indeed the entrant s quality is high in other words an incumbent s reaction may cause the consumers to make inferences about the entrant s quality such strategic implications of the incumbent s reactions have to be carefully analyzed before determining the optimal response by the incumbent in this paper we propose a conceptual framework for understanding differences in the magnitude and timing of incumbents responses to competitive entries we consider a model in which a monopolist incumbent firm faces competitive entry the incumbent firm knows the true quality of the entrant with certainty although consumers are aware of the incumbent s product quality through their prior experience they are initially uncertain of the entrant s product quality in such a situation a high quality entrant has the incentive to signal her true quality through her strategic price choice however the uncertainty about the entrant s quality is favorable to the incumbent in the sense that consumers believe with a high probability that the entrant s quality is low as a result the strategic incentives facing the incumbent and the entrant oppose each other while the entrant wants to signal her high quality the incumbent wants to prevent her from doing so we demonstrate that one way the incumbent can prevent the quality signaling is to select a higher than his optimal competitive duopoly price in other words the incumbent can prevent or jam the entrant s quality signaling by choosing a price higher than his optimal competitive price when consumers are fully informed about the entrant s true quality though the signal jamming price is lower than the monopoly price the price is substantially higher than the competitive price this marginal reduction in the incumbent s price from the pre entry monopolistic price represents a muted or lack of response by the incumbent to the competitive entry however once the entrant s quality gets revealed in subsequent periods through consumer usage and word of mouth the entrant has no incentive to engage in quality signaling and the incumbent has no incentive to jam it therefore the market reverts to the complete information competitive prices and the incumbent lowers his price considerably this temporal pattern of muted price reduction in the first period followed by a sharp price reduction in the second period corresponds to a delayed defensive reaction in our model although the empirical studies suggest that the delayed reaction may arise due to factors such as managerial inertia or indecision we demonstrate that such a behavior is indeed an optimal strategy for a profit maximizing firm thus our model reconciles empirical results with the equilibrium outcome of a strategic analytical framework furthermore in an experimental setting we test the predictive power of our framework and establish that consumers indeed form conjectures about the entrant s quality based on the incumbent s reactions in the first experimental study we find strong support for the notion that the incumbent s price reaction may indicate entrant s quality in a follow up study we observe that whenever the incumbent lowers prices respondents judge the quality of the entrant to be higher as compared to the case when prices are the same or increased the managerial implication of this paper is that well established incumbent firms should be cautious in the implementation of their defensive responses to product introductions of uncertain quality by competitors of particular concern are situations where the reactions are easily observable by consumers a strong reaction may suggest that the incumbent takes the competitive threat seriously leading consumers to believe in the quality of the competitor s product

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

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

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

productivity wages and intrinsic motivations there is a long standing debate in labour economics on the impact of workers intrinsic motivations on equilibrium wages one direction in economic theory suggests that intrinsically motivated workers are willing to accept lower wages and donate work for example in terms of unpaid overtime the donative labour hypothesis in the other direction intrinsic motivations are expected to increase worker productivity and in turn wages the intrinsic motivation productivity hypothesis using a new database of a sample of workers in the cooperative non profit sector we find that consistently with the motivation productivity hypothesis more motivated workers earn significantly higher wages which signals higher productivity evidence supporting the donative labour hypothesis is weaker even though a generally positive connection between motivations and work donation is confirmed we interpret these findings by arguing that the impact of the donative labour effect is dominated by the intrinsic motivation productivity effect

commercial use of upc scanner data industry and academic perspectives the authors report the findings from an exploratory investigation of the use of upc scanner data in the consumer packaged goods industry in the u s the study examines the practitioner community s view of the use of scanner data and compares these views with academic research forty one executives from ten data suppliers packaged goods manufacturers and consulting firms participated in wide ranging in person interviews conducted by the authors the interviews sought to uncover key questions practitioners would like to answer with scanner data how scanner data is applied to these questions and the industry s perspective regarding the success that the use of scanner data has had in each area the authors then compare and contrast practitioners views regarding the resolution of each issue with academic research this produces a 2 2 classification of each question as resolved or unresolved from the perspectives of industry and academia along the diagonal of the 2 2 issues viewed as unresolved by both groups are important topics for future research issues deemed resolved by both groups are correspondingly of lower priority in the off diagonal cells industry and academics disagree these topics should be given priority for discussion information exchange and possible further research practitioners reported that scanner data analysis has had the most success and been most widely adopted for decision making in consumer promotions i e coupons trade promotions and pricing for example logit and regression models applied to scanner data have revealed very low average consumer response to coupons which has directly led to reduced couponing activity managers also reported high levels of comfort with and impact from analyses of trade promotions and price elasticities while industry views most of the issues in these areas to be resolved academic research raises concerns about a number of practices in common commercial use these include price threshold analysis and trade promotion evaluation using baseline and incremental sales in product strategy advertising and distribution management practitioners reported that the use of scanner data has had more limited development success and impact in the case of new product decisions scanner data use has been slow to develop due to the inherent limitations of historicaldata for these decisions and a heavy reliance on traditional primary research methods in advertising scanner data is widely analyzed with models but confusion among practitioners is very high due to controversies about methods e g what level of data aggregation is best and conflicting results in distribution and retail management scanner data use has tremendous potential but a mixed track record to date thus practitioners view the use of scanner data as unresolved for most issues in product strategy advertising and distribution this view is largely though not entirely consistent with academic research which has only begun to address many of the key questions raised by practitioners in light of the large number of unresolved issues and mixed record of scanner data use to date the authors offer aseries of specific recommendations for immediate and long term research priorities that are likely to have the greatest impact on commercial utilization of upc scanner data topics of immediate priority include price thresholds and gaps baseline and incremental sales base price elasticity competitive reactions measurement of advertising effects management of brand equity rationalization of product assortments and category management long term priorities include a greater emphasis on profitability versus sales or market share developing prescriptive models versus descriptive models and the need for industry standards

wearout effects of different advertising themes a dynamic bayesian model of the advertising sales relationship models of advertising response implicitly assume that the entire advertising budget is spent on disseminating one message in practice managers use different themes of advertising for example price advertisements versus product advertisements and within each theme they employ different versions of an advertisement in this study we evaluate the dynamic effects of different themes of advertising that have been employed in a campaign we develop a model that jointly considers the effects of wearout as well as that of forgetting in the context of an advertising campaign that employs five different advertising themes we quantify the differential wearout effects across the different themes of advertising and examine the interaction effects between the different themes using a bayesian dynamic linear model dlm such a response model can help managers decide on the optimal allocation of resources across the portfolio of ads as well as better manage their scheduling we develop a model to show how our response model parameters can be used to improve the effectiveness of advertising budget allocation across different themes we find that a reallocation of resources across different themes according to our model results in a significant improvement in demand

planning media schedules in the presence of dynamic advertising quality a key task of advertising media planners is to determine the best media schedule of advertising exposures for a certainbudget conceptually the planner could choose to do continuous advertising i e schedule ad exposures evenly overall weeks or follow a strategy of pulsing i e advertise in some weeks of the year and not at other times previous theoretical analyses have shown that continuous advertising is optimal for nearly all situations however pulsing schedules are very common in practice either the pract ice of pulsing is inappropriate or extant models have not adequately conceptualized the effects of advertising spending over time this paper offers a model that shows pulsing strategies can generate greater total awareness than the continuous advertising when the effectiveness of advertisement i e adquality varies overtime specifically ad quality declines because of advertising wearout during periods of continuous advertising and it restores due to forgetting effects during periods of no advertising such dynamics make it worth while for advertisers to stop advertising when ad quality becomes very low and wait for ad quality to restore beforestarting the next burst again as is common in practice based on the extensive behavioral research on advertising repetition and advertising wearout we extend the classical nerlove and arrow 1962 model by incorporating the notions of repetition wearout copy wearout and ad quality restoration repetition wearout is a result of excessive frequency beca use ad viewers perceive that there is nothing new to be gained from processing the ad they withdraw their attention or they become unmotivated to react to advertising information copy wearout refers to the decline inad quality due to passage of time independent of the level of frequency ad quality restoration is the enhancement of ad quality during media hiatus as a consequence of viewers forgetting the details of the advertised messages thus making ads appear like new when reintroduced later the proposed model has the property that when wearout effects are present a strategy of pulsing is superior to continuous advertising even when the advertising response function is concave this is illustrated by a numerical example that compares the total awareness generated by a single concentrated pulse of varying duration blitz schedules and continuous advertising the even schedule this property can be explained by the tension between the pressure to spend the fixed media budget quickly to avoid copy wearout and the opposing pressure to spread out the media spending over time to mitigate repetition wearout the proposed model is empirically tested by using brand level data from two advertising awareness tracking studies that also include the actual spen ding schedules the first data set is for a major cereal brand while the other is for a brand of milk chocolate such advertising tracking studies are now a common and popular means for evaluating advertising effectiveness in many markets e g millward brown narketmind in the empirical tests the model parameters are estimated by using the kalman filter procedure which is eminently suited for dynamic models because it attends to the intertemporal dependencies in awareness build up and decay via the use of conditional densities the estimated parameters are statistically significant have the expected signs and are meaningful from both theoretical and managerial viewpoints the proposed model fits both the data sets rather well and better than several well known advertising models namely the vidale wolfe brandaid litmus and trackermodels but not decisively better than the nerlove arrow model however unlike the nerlove arrow model the proposed model yields different total awareness for different strategies of spending the same fixed budget thus allowing media planners to discriminate among several media schedules given the empirical support for the model the paper presents an implementable approach for utilizing it to evaluate large numbers of alternative media schedules and determine the best set of media schedules for consideration in media planning this approach is based on an algorithm that combines a genetic algorithm with the kalman filter procedure the paper presents the results of applying this approach in the case studies of the cereal and milk chocolate brands the form of the best advertising spending strategies in each case was a pulsing strategy and there were many schedules that were an improvement over the media schedule actually used in each campaign

demand and supply dynamics for sequentially released products in international markets the case of motion pictures we develop an econometric model to study a setting in which a new product is launched first in its domestic market and only at a later stage in foreign markets and where the product s performance demand and availability supply are highly interdependent over time within and across markets integrating literature on international diffusion success breeds success trends and the theatrical motion picture industry the focus of the empirical analysis we develop a dynamic simultanenous equations model of the drivers and interrelationship of the behavior of consumers audiences and retailers exhibitors our findings emphasize the importance of considering the endogeneity and simultaneity of audience and exhibitor behavior and challenge conventional wisdom on the determinants of box office performance which is predominantly based on modeling frameworks that fail to account for the interdependence of performance and availability specifically we find that variables such as movie attributes and advertising expenditures which are usually assumed to influence audiences directly mostly influence revenuesindirectly namely through their impact on exhibitors screen allocations in addition consistent with the idea that the buzz for a movie is perishable we find that the longer is the time lag between releases the weaker is the relationship between domestic and foreign market performance an effect mostly driven by foreign exhibitors screen allocations

first mover advantage through distribution a decomposition approach whereas the extant literature on entry order effects establishes that first entrants often earn higher market shares market share advantage the literature on distribution suggests that increased distribution has a positive effect on sales can distribution help us better understand entry order effects on market shares this paper examines how the first entrant in a geographical market achieves a market share advantage through distribution for this purpose i propose a simple method of decomposing sales into physical distribution and sales performance the data come from a manually collected panel on six major japanese convenience store chains from 47 geographical markets between 1991 and 2007 using an instrumental variable approach to address the potential endogeneity of entry order i find first entrants have a positive market share advantage over later entrants specifically the physical distribution measured by the number of outlets in a market drives most of the advantage meanwhile the pos