How Dynamic Consumer Response, Competitor Response, Company Support, and Company Inertia Shape Long-Term Marketing Effectiveness
Marketing Science · 2004 · Volume 23 · Issue 4
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.
Keywords
long-term marketing effectiveness, dynamic consumer and competitor response, company inertia and support, vector autoregressive (VAR) models, impulse-response functions, policy simulation restrictions, postpromotion dip
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