Author: admin

Posted on

When do price threshold matter in retail categories?

with Shuba Srinivasan and Philip-Hans Franses, Marketing Science, 26(1), 83-100, 2007.

Full Article

Abstract:
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.

Click here to read the full paper

 

Posted on

Modeling Marketing Dynamics by Time Series Econometrics

with Imran Currim, Marnik G. Dekimpe, Eric Ghysels, Dominique M. Hanssens, Natalie Mizik and Prasad Naik, Marketing Letters, 15:4, 167-183, 2005, leading article

Full Article

Abstract:
This paper argues that time-series econometrics provides valuable tools and opens exciting research opportunities to marketing researchers. It allows marketing researchers to advance traditional modeling and estimation approaches by incorporating dynamic processes to answer new important research questions. The authors discuss the challenges facing time-series modelers in marketing, provide an overview of recent methodological developments and several applications, and highlight fruitful areas for future research. This discussion is based on the First Annual Conference on ‘Modeling Marketing Dynamics by Time Series Econometrics’ at the Tuck School of Business at Dartmouth, Hanover, New Hampshire, USA on September 16–17, 2004.

Click here to read the full paper

Posted on

New Products, Sales Promotions, and Firm Value: The Case of the Automobile Industry

with J.Silva-Risso, S.Srinivasan and D.M. Hanssens, Journal of Marketing, 68 (October), 142-156, 2004

Full Article

Abstract:
Year after year, managers strive to improve financial performance and firm value through marketing actions such as new product introductions and promotional incentives. This study investigates the short- and long-term impact of such marketing actions on financial metrics, including top-line, bottom-line, and stock market performance. The authors apply multivariate time-series models to the automobile industry, in which both new product introductions and promotional incentives are considered important performance drivers. Notably, whereas both marketing actions increase top-line firm performance, their long-term effects strongly differ for the bottom line. First, new product introductions increase long-term financial performance and firm value, but promotions do not. Second, investor reaction to new product introduction grows over time, indicating that useful information unfolds in the first two months after product launch. Third, product entry in a new market yields the highest top-line, bottom-line, and stock market benefits. Managers may use these results to justify new product efforts and to weigh short- and long- term consequences of promotional incentives.

Click here to read the full paper

Posted on

How dynamic consumer response, competitor response, company support, and company inertia shape long-term marketing effectiveness

Marketing Science, 23 (4), 596-610.

Full Article

Abstract:
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.

Click here to read the full paper

Posted on

Who benefits from store brand entry?

with S. Srinivasan, Marketing Science, 23 (3), Summer, 364-390, 2004

Full Article

Abstract:
Store brand entry has become a key issue in marketing as it may structurally change the performance of and the interactions among all market players. Based on their multivariate time-series analysis, the authors demonstrate permanent performance effects of store brand entry, typically benefiting the retailer, the consumers, and premium-brand manufacturers, while harming second-tier brand manufacturers. For the retailer, they consistently find two beneficial effects of store brand entry: high unit margins on the store brand itself and higher unit margins on the national brands. This increase in unit margins implies that the retailer strengthens its bargaining position vis-à-vis national brand manufacturers. However, store brand entry only rarely yields category expansion and does not create store traffic or revenue benefits. Second, consumers do not obtain lower prices on all national brands, only on some second-tier brands. However, they benefit from enlarged product assortment and intensified promotional activity that lowers average price paid for two out of four categories. For the manufacturers, store brand entry is typically beneficial for premium-price national brands, but not for second-tier national brands. Often, premium brands experience lower long-term price sensitivity and higher revenues, whereas second-tier brands experience higher long-term price sensitivity and lower revenues.

Click here to read the full paper

Posted on

Do Promotions Benefit Retailers, Manufacturers, or Both

with S. Srinivasan, D.M. Hanssens and M. Dekimpe, Management Science, 50 (5), 617-629, 2004.

Full Article

Abstract:
Do price promotions generate additional revenue and for whom? Which brand, category, and market conditions influence promotional benefits and their allocation across manufacturers and retailers? To answer these questions, we conduct a large-scale econometric investigation of the effects of price promotions on manufacturer revenues, retailer revenues, and total profits (margins). A first major finding is that a price promotion typically does not have permanent monetary effects for either party. Second, price promotions have a predominantly positive impact on manufacturer revenues, but their effects on retailer revenues are mixed. Moreover, retailer category margins are typically reduced by price promotions. Even when accounting for cross-category and store-traffic effects, we still find evidence that price promotions are typically not beneficial to the retailer. Third, our results indicate that manufacturer revenue elasticities are higher for promotions of small-share brands, for frequently promoted brands and for national brands in impulse product categories with a low degree of brand proliferation and low private-label shares. Retailer revenue elasticities are higher for brands with frequent and shallow promotions, for impulse products, and in categories with a low degree of brand proliferation. Finally, retailer margin elasticities are higher for promotions of small-share brands and for brands with infrequent and shallow promotions. We discuss the managerial implications of our results for both manufacturers and retailers.

Click here to read the full paper

Posted on

The Long-Term Effects of Price Promotions on Category Incidence, Brand Choice and Purchase Quantity

with D.M. Hanssens and S. Siddarth, Journal of Marketing Research, vol. 34 (November), 421-439, 2002. Winner of the O’Dell Award 2007.

Full Article

Article:
To what extent do price promotions have a long-term effect on the components of brand sates, 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 and suggest some areas for further research.

Click here to read the full paper

Posted on

Internet Marketing the News: Leveraging Brand Equity from Market Place to Market Space

with E. Dans, Journal of Brand Management, 8 (4-5), 303-314, 2001.

Full Article

Abstract:
Can established newspapers leverage their offline brand equity to the online edition in order to create visits and page views? This question is key for publishers, as they are now facing a change only comparable to the advent of the printing press in the 15th century. In the present study, both cross-sectional time-series analyses are applied to 12 Spanish newspapers. The findings indicate that brand equity in the marketplace can be efficiently leveraged into the marketplace. Online readership depends both on offline popularity and on the profile fit between the typical Internet user and the typical offline reader of the newspaper. The digital market dynamics are uncovered by the persistence modelling of visits, page views, and brand choice of each newspaper. First, the total number of visits initially evolves, but later stabilises. In contrast, page views continue to evolve as usage depth increases over time. Finally, brand choice is stable and proportional to the brand equity borrowed from the printed newspaper. The analysis yeilds specific recommendations for the three leading newspapers. 

Click here to read the full paper