Are persistent marketing effects most likely to appear right after the introduction of a product? The authors give an affirmative answer to this question by developing a model that explicitly reports how persistent and transient marketing effects evolve over time. The proposed model provides managers with a valuable tool to evaluate their allocation of marketing expenditures over time. An application of the model to many pharmaceutical products, estimated through (exact initial) Kalman filtering, indicates that both persistent and transient effects occur predominantly immediately after a brand's introduction. Subsequently, the size of the effects declines. The authors theoretically and empirically compare their methodology with methodology based on unit root testing and demonstrate that the need for unit root tests creates difficulties in applying conventional persistence modeling. The authors recommend that marketing models should either accommodate persistent effects that change over time or be applied to mature brands or limited time windows only.
AkçuraM. Tolga, GönülFüsun F., and PetrovaElina, (2004), “Consumer Learning and Brand Valuation: An Application on Over-the-Counter Drugs,”Marketing Science, 23(1), 156–69.
2.
AndrewsRick L., and FrankeGeorge R., (1996), “Dynamics of Aggregate Response Sensitivities to Marketing Mix Variables,”Journal of Business Research, 36(2), 145–55.
3.
AssmusGert, FarleyJohn U., and LehmannDonald R., (1984), “How Advertising Affects Sales: Meta-Analysis of Econometric Results,”Journal of Marketing Research, 21(February), 65–74.
4.
AtamanBerk, MelaCarl F., and Van HeerdeHarald J., (2008), “Building Brands,”Marketing Science, 27(6), 1036–1054.
5.
BronnenbergBart J., DharSanjay K., and DubéJean-Pierre, (2007), “Consumer Packaged Goods in the United States: National Brands, Local Branding,”Journal of Marketing Research, 44(February), 4–13.
6.
BronnenbergBart J., MahajanVijay, and VanhonackerWilfried R., (2000), “The Emergence of Market Structure in New Repeat-Purchase Categories: The Interplay of Market Share and Retailer Distribution,”Journal of Marketing Research, 37(February), 16–31.
7.
CainPeter, M., (2005), “Modelling and Forecasting Brand Share: A Dynamic Demand System Approach,”International Journal of Research in Marketing, 22(2), 203–220.
8.
DejongDavid N., NankervisJohn C., SavinNathan E., and WhitemanCharles H., (1992), “Integration Versus Trend Stationarity in Time-Series,”Econometrica, 60(2), 423–33.
9.
DekimpeMarnik G., and HanssensDominique M., (1995), “The Persistence of Marketing Effects on Sales,”Marketing Science, 14(1), 1–21.
10.
DekimpeMarnik G., and HanssensDominique M., (1999), “Sustained Spending and Persistent Response: A New Look at Long-Term Marketing Profitability,”Journal of Marketing Research, 36(November), 397–412.
11.
DekimpeMarnik G., HanssensDominique M., and Silva-RissoJ.M., (1999), “Long-Run Effects of Price Promotions in Scanner Markets,”Journal of Econometrics, 89(1–2), 269–91.
12.
DurbinJames, and KoopmanSiem J., (2001), Time Series Analysis by State Space Methods.New York: Oxford University Press.
13.
ErdemTülin, and KeaneMichael P., (1996), “Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets,”Marketing Science, 15(1), 1–20.
14.
FoekensEijte W., LeeflangPeter S.H., and WittinkDick R., (1999), “Varying Parameter Models to Accommodate Dynamic Promotion Effects,”Journal of Econometrics, 89(1–2), 249–68.
15.
GönülFüsun F., CarterFranklin, PetrovaElina, and SrinivasanKannan, (2001), “Promotion of Prescription Drugs and Its Impact on Physicians’ Choice Behavior,”Journal of Marketing, 65(July), 79–90.
16.
HarveyAndrew C., and KoopmanSiem J., (1992), “Diagnostic Checking of Unobserved-Components Time-Series Models,”Journal of Business & Economic Statistics, 10(4), 377–89.
17.
HorváthCsilla, LeeflangPeter S.H., WieringaJaap E., and WittinkDick R., (2005), “Competitive Reaction- and Feedback Effects Based on VARX Models of Pooled Store Data,”International Journal of Research in Marketing, 22(4), 415–26.
18.
HurvichClifford M., and TsaiChih-Ling, (1989), “Regression and Time-Series Model Selection in Small Samples,”Biometrika, 76(2), 297–307.
19.
HurwitzMark A., and CavesRichard E., (1988), “Persuasion or Information–Promotion and the Shares of Brand Name and Generic Pharmaceuticals,”Journal of Law & Economics, 31(2), 299–320.
20.
KoopmanSiem, J., (1997), “Exact Initial Kalman Filtering and Smoothing for Nonstationary Time Series Models,”Journal of the American Statistical Association, 92(440), 1630–38.
21.
KoopmanSiem J., and DurbinJames, (2003), “Filtering and Smoothing of State Vector for Diffuse State-Space Models,”Journal of Time Series Analysis, 24(1), 85–98.
22.
LeeflangPeter S.H., BijmoltTammo H.A., van DoornJenny, HanssensDominique M., van HeerdeHarald J., VerhoefPeter C., and WieringaJaap E., (2009), “Creating Lift Versus Building the Base: Current Trends in Marketing Dynamics,”International Journal of Research in Marketing, 26(1), 13–20.
23.
MaddalaG.S., and KimIn-Moo, (1999), Unit Roots, Cointegration, and Structural Change.Cambridge, UK: Cambridge University Press.
24.
ManchandaPuneet, RossiPeter E., and ChintaguntaPradeep K., (2004), “Response Modeling with Nonrandom Marketing-Mix Variables,”Journal of Marketing Research, 41(November), 467–78.
25.
MelaCarl F., JedidiKamel, and BowmanDouglas, (1998), “The Long-Term Impact of Promotions on Consumer Stockpiling Behavior,”Journal of Marketing Research, 35(May), 250–62.
26.
NaikPrasad A., MantralaMurali K., and SawyerAlan G., (1998), “Planning Media Schedules in the Presence of Dynamic Advertising Quality,”Marketing Science, 17(3), 214–35.
27.
NarayananSridhar, ManchandaPuneet, and ChintaguntaPradeep K., (2005), “Temporal Differences in the Role of Marketing Communication in New Product Categories,”Journal of Marketing Research, 42(August), 278–90.
28.
NerloveMarc, and ArrowKenneth J., (1962), “Optimal Advertising Policy Under Dynamic Conditions,”Economica, 29(114), 129–42.
29.
NewhouseJoseph, P., (1993), Free for All? Lessons from the RAND Health Insurance Experiment.Cambridge, MA: Harvard University Press.
30.
NijsVincent R., DekimpeMarnik G., SteenkampJan-Benedict E.M., and HanssensDominique M., (2001), “The Category-Demand Effects of Price Promotions,”Marketing Science, 20(1), 1–22.
31.
PanYigang G., and LehmannDonald R., (1993), “The Influence of New Brand Entry on Subjective Brand Judgments,”Journal of Consumer Research, 20(1), 76–86.
32.
ParsonsLeonard, J., (1975), “Product Life Cycle and Time-Varying Advertising Elasticities,”Journal of Marketing Research, 12(November), 476–80.
33.
PauwelsKoen, (2004), “How Dynamic Consumer Response, Competitor Response, Company Support, and Company Inertia Shape Long-Term Marketing Effectiveness,”Marketing Science, 23(4), 596–610.
34.
PauwelsKoen, CurrimImran, DekimpeMarnik G., GhyselsEric, HanssensDominique M., MizikNatalie, and NaikPrasad A., (2005), “Modeling Marketing Dynamics by Time Series Econometrics,”Marketing Letters, 15(4), 167–83.
35.
PauwelsKoen, and HanssensDominique M., (2007), “Performance Regimes and Marketing Policy Shifts,”Marketing Science, 26(3), 293–311.
36.
PauwelsKoen, HanssensDominique M., and SiddarthS., (2002), “The Long-Term Effects of Price Promotions on Category Incidence, Brand Choice, and Purchase Quantity,”Journal of Marketing Research, 39(November), 421–39.
37.
PutsisWilliam, P., (1998), “Parameter Variation and New Product Diffusion,”Journal of Forecasting, 17(3–4), 231–57.
38.
RizzoJohn, A., (1999), “Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs,”Journal of Law & Economics, 42(1), 89–116.
39.
SchwertG. William, (1987), “Effects of Model-Specification on Tests for Unit Roots in Macroeconomic Data,”Journal of Monetary Economics, 20(1), 73–103.
40.
SchwertG. William, (2002), “Tests for Unit Roots: A Monte Carlo Investigation (Reprinted),”Journal of Business & Economic Statistics, 20(1), 5–17.
41.
SethuramanRaj, and TellisGerard J., (1991), “An Analysis of the Trade-Off Between Advertising and Price Discounting,”Journal of Marketing Research, 28(May), 160–74.
42.
SlotegraafRebecca J., and PauwelsKoen, (2008), “The Impact of Brand Equity and Innovation on the Long-Term Effectiveness of Promotions,”Journal of Marketing Research, 45(June), 293–306.
43.
SriramS., ChintaguntaPradeep K., and NeelameghamRamya, (2006), “Effects of Brand Preference, Product Attributes, and Marketing Mix Variables in Technology Product Markets,”Marketing Science, 25(5), 440–56.
44.
SriramS., and KalwaniManohar U., (2007), “Optimal Advertising and Promotion Budgets in Dynamic Markets with Brand Equity as a Mediating Variable,”Management Science, 53(1), 46–60.
45.
SteenkampJan-Benedict E.M., NijsVincent R., HanssensDominique M., and DekimpeMarnik G., (2005), “Competitive Reactions to Advertising and Promotion Attacks,”Marketing Science, 24(1), 35–54.
46.
TsionasEfthymios, G., (2000), “Real Convergence in Europe: How Robust are Econometric Inferences?”Applied Economics, 32(11), 1475–82.
47.
Van HeerdeHarald J., MelaCarl F., and ManchandaPuneet, (2004), “The Dynamic Effect of Innovation on Market Structure,”Journal of Marketing Research, 41(May), 166–83.
48.
WestMike, and HarrisonJeff, (1997), Bayesian Forecasting and Dynamic Models, 2d ed.New York: Springer-Verlag.
49.
WittinkDick, R., (2002), “Analysis of ROI for Pharmaceutical Promotion (ARPP): A Second Independent Study,” presentation to the Association of Medical Publications (September 8), (accessed October 16, 2009), [available at http://www.rxpromoroi.org/arpp/index.html].
50.
YooShijin, (2006), “Assessing the Changes of Long-Run Impact of Marketing Mix Variables: An Application of Dynamic Impulse Response Functions,” working paper, Lee Kong Chian School of Business, Korea University.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
