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Tuck School of Business, Dartmouth University, Hanover, New Hampshire 03755
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.
koen.h.pauwels{at}dartmouth.edu
History: Received: June 5, 2003;
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