an analysis of the tradeoff between advertising and price discounting the authors examine an important influence on the price advertising tradeoff the ratio of price and advertising elasticities their theoretical analysis stresses the centrality of the elasticity r

price promotions cause impatience in this research the authors propose that incidental exposure to price promotions can cause downstream impatience in an unrelated domain specifically price promotions trigger reward seeking a ge

a dynamic multinomial probit model for brand choice with different long run and short run effects of marketing mix variables in this paper we propose a dynamic multinomial probit model in order to estimate the long run and short run effects of marketing mix variables on brand choice the latent variables which contain the unobserved perceived utilities follow a first order vector error correction autoregressive process of order 1 with current and lagged explanatory variables the unrestricted autoregressive parameter matrix concerns the intertemporal correlation in perceived utilities of households over purchase occasions and indicates the persistence in brand choice as explanatory variables we consider relative prices and promotional activities like feature and display an important and novel feature of our model is that it allows for different long run and short run effects of promotional activities thereby extending the models that are currently available in the literature additionally to account for different base preferences for brands across households we allow for consumer heterogeneity our application concerns a panel of households choosing among several brands of a fmcg our estimated model turns out to be an improvement over a static model and over a model with only short run effects in terms of in sample fit and out of sample forecasts copyright 2000 john wiley sons ltd

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

dual labor markets efficiency wages and search this article presents an equilibrium model of a dual labor market firms are assumed to be identical ex ante and dualism arises endogenously the dual labor market outcome is supported by efficiency wage and search considerations firms choose wage effort requirement packages optimally given optimal search and effort choice by workers and vice versa we prove existence and investigate the occurrence and nature of dual labor market equilibria

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

a supply chain under limited time promotion the effect of customer sensitivity abstract we consider a two echelon supply chain with a supplier and a retailer facing stochastic customer demands the supplier is a leader who determines a wholesale price in response the retailer orders products and sets a price which affects customer demands the goal of both players is to maximize their profits we find the stackelberg equilibrium and show that it is unique not only when the supply chain is in a steady state but also when it is in a transient state induced by a supplier s promotion there is a maximum length to the promotion however beyond which the equilibrium ceases to exist moreover if customer sensitivity increases then the wholesale equilibrium price decreases product orders increase and product prices drop this effect well observed in real life does not however necessarily imply that the promotion is always beneficial conditions for the profitability of a limited time promotion are shown and analyzed numerically we discuss both open loop and feedback policies and derive the conditions necessary for them to remain optimal under stochastic demand fluctuations

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

the effect of standardized information on firm survival and marketing strategies we argue that standardized information disclosure information using a common format and uniform metrics creates asymmetric opportunities for firms which affects their strategies and survival we test our predictions using a longitudinal quasi experimental field study involving the nutrition labeling and education act of 1990 nlea and we focus on firm market share within a category as a key asymmetry findings indicate that in general the nlea had no effect on firm responses however when accounting for firm differences we observe that the nlea led to 1 an increase in small share firm exits and 2 a greater increase in distribution for large share firms no concurrent increase in price by large share firms following the nlea was observed we conclude by discussing the implications of these effects for firm strategy the design of public policy and theories regarding the impact of information on markets

empirical generalizations about market evolution and stationarity we present empirical generalizations about conditions under which marketing variables evolve or remain stationary we first define evolution statistically and make the case why it is an important concept for increasing our understanding of long run marketing effectiveness we then briefly review ways in which evolution can be tested empirically from readily available data we present a database of over 400 prior analyses and catalog the relative incidence of stationarity versus evolution in market performance and marketing spending we find that evolution is the dominant characteristic for sales and marketing mix spending but that stationarity is the dominant characteristic for market share thus we find strong support for the conjecture that many markets are in a long run equilibrium where the relative position of the players is only temporarily disturbed by their respective marketing activities we assess the impact of a number of covariates on the likelihood of finding stationarity evolution in sales

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 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

the option value of returns theory and empirical evidence when a firm allows the return of previously purchased merchandise it provides customers with an option that has measurable value whereas the option to return merchandise leads to an increase in gross revenue it also creates additional costs selecting an optimal return policy requires balancing both demand and cost implications in this paper we develop a structural model of a consumer s decision to purchase and return an item that nests extant choice models as a special case the model enables a firm to both measure the value to consumers of the return option and balance the costs and benefits of different return policies we apply the model to a sample of data provided by a mail order catalog company we find considerable variation in the value of returns across customers and categories when the option value is large there are large increases in demand for example the option to return women s footwear is worth an average of more than 15 per purchase to customers and increases average purchase rates by more than 50 we illustrate how the model can be used by a retailer to optimize his return policies across categories and customers

nonlinearities in real exchange rate determination do african exchange rates follow a random walk in this article we aim at modelling the long run behaviour of the real effective exchange rates reer for a pool of african countries not much attention has been paid to this group of countries in particular to the existence of nonlinearities in the long run path of such a variable controlling for two sources of nonlinearities i e asymmetric adjustment to equilibrium and nonlinear deterministic trends allows us to gain some insight about the behaviour of the african reer we find that these sources of nonlinearities help us to explain the apparent unit root behaviour found applying linear unit root tests for most of the countries

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

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

a model of brand choice and purchase quantity price sensitivities many consumer decisions involve a discrete choice and a continuous outcome examples of such decisions are whether to own a home or rent one and how much to spend which brand of orange juice to buy and how many ounces to buy in cases like these the choice decision is typically modeled separately say using a logit model and the continuous outcomes modeled separately using regression analysis however the continuous outcomes may not be independent of the discrete choice and vice versa and modeling the two decisions independently can lead to inefficient choice parameter estimates and biased and inconsistent regression parameter estimates in this paper we present a methodology from the limited dependent variable literature to model the dependence between the choice and quantity decisions our substantive interest is in the role of price in the choice and quantity decisions when choosing among alternatives we argue that consumers consider prices of all the competitive brands in the quantity decision on the other hand only the price of the chosen alternative is expected to impact how much of the alternative is purchased the analysis of three brands using disaggregate level panel data strongly supports our hypothesis about the role of competitive prices in the choice and quantity decisions

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

dynamic allocation of pharmaceutical detailing and sampling for long term profitability the u s pharmaceutical industry spent upwards of 18 billion on marketing drugs in 2005 detailing and drug sampling activities accounted for the bulk of this spending to stay competitive pharmaceutical managers need to maximize the return on these marketing investments by determining which physicians to target as well as when and how to target them in this paper we present a two stage approach for dynamically allocating detailing and sampling activities across physicians to maximize long run profitability in the first stage we estimate a hierarchical bayesian nonhomogeneous hidden markov model to assess the short and long term effects of pharmaceutical marketing activities the model captures physicians heterogeneity and dynamics in prescription behavior in the second stage we formulate a partially observable markov decision process that integrates over the posterior distribution of the hidden markov model parameters to derive a dynamic marketing resource allocation policy across physicians we apply the proposed approach in the context of a new drug introduction by a major pharmaceutical firm we identify three prescription behavior states a high degree of physicians dynamics and substantial long term effects for detailing and sampling we find that detailing is most effective as an acquisition tool whereas sampling is most effective as a retention tool the optimization results suggest that the firm could increase its profits substantially while decreasing its marketing spending our suggested framework provides important implications for dynamically managing customers and maximizing long run profitability

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

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

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

investigating purchase incidence brand choice and purchase quantity decisions of households we develop a comprehensive utility maximizing framework to study the impact of marketing variables on the category purchase brand choice and purchase quantity decisions of households for frequently purchased packaged goods the model allows for dependence among the three decisions while ensuring that these decisions provide in combination the greatest possible utility to the household by accounting for variations in reservation prices and intrinsic brand preferences across households the modeling framework explicitly captures the effects of unobserved heterogeneity on all three purchase decisions the principal empirical finding from analyzing the a c nielsen data for the yogurt product category is that the substantive implications for the effects of marketing variables are sensitive to whether these effects are determined conditional or unconditional on a product category purchase our results show that reservation prices and intrinsic brand preferences vary across households and not accounting for these variations in the estimation could lead to biased estimates for the coefficients of the marketing variables a comparison of our results to those obtained from a nested logit model of purchase incidence and brand choice reveals that our proposed model performs better using both a formal statistical test as well as the criterion of predictive validity in a holdout sample of panelists further the purchase quantity model compares favorably with two alternative models of quantity choice in the validation sample

reference price and price perceptions a comparison of alternative models reference price effects on consumer price perceptions are often explained by helson s adaptation level theory in which the cognitive representation of reference price is the prototype of the relevant category however recent conceptualizations and empirical evidence suggest the possibility of an exemplar model which may be specified using volkmann s range theory or parducci s range frequency theory in two experiments these three contextual models of reference price effects are pitted against one another based on the manova and model fitting range frequency theory accounted for reference price effects that the other theories could not suggesting that consumers compare the target price against specific members of the category rather than the category prototype a third experiment demonstrated that range and frequency effects are moderated by the stimulus presentation condition suggesting that consumers place greater weight on extreme prices anchoring the range for internal reference prices than for external reference prices