Executive Summary
Marketing expenditures may lead to transient (temporary) and persistent (enduring) sales increases. Managers would ideally allocate their marketing budgets to periods in which strong persistent effects might be expected (i.e., a high return on the marketing investments). Existing studies typically assume persistent marketing effects that are constant over time. So far, little is known about the evolution of these effects over time, specifically from the moment of introduction of a brand to a more mature stage. In this study, the authors investigate how the persistent and temporary marketing effects evolve from the moment of introducing a new brand.
Relying on advanced time-series econometrics, the authors develop a model that indicates the persistent and transient marketing effect for every observed period. They apply the model to monthly sales data and data on marketing expenditures of 89 prescription drugs from 39 categories. The sample contains all drugs introduced between the beginning of 1993 and the end of 2000 with a 2000 annual sales level of $25 million or more in the United States and for which a minimum of 50 observations are available. The results show that both persistent and transient marketing effects are most likely to occur right after the brand’s introduction and that they decline in size over time. This implies that marketing expenditures in the more mature stage of a brand lead to smaller sales increases that are less likely to be persistent than sales effects of marketing expenditures right after introduction.
The authors theoretically and empirically compare their methodology with conventional methodology for assessing persistent marketing effects. The comparisons demonstrate that the newly developed model has several advantages over the conventional approach. This leads to the recommendation that marketing models should either accommodate persistent effects that change over time or be applied to mature brands or limited time windows only.
Biography
Ernst C. Osinga is a doctoral student in the Department of Marketing at the University of Groningen, the Netherlands. He holds a research master degree from the same university. Ernst’s research involves the (financial) consequences of pharmaceutical marketing. Methodologically, his papers are linked by the use of time-series econometrics, in particular Kalman filtering.
Peter S.H. Leeflang is Frank M. Bass Professor of Marketing at the University of Groningen, the Netherlands. He obtained his PhD in 1974 from the Netherlands School of Economics, Rotterdam, the Netherlands. In 1978–1979, he was president of the European Marketing Academy, and from 1981 to 1990, he was vice president. In 1990 and 2003, he was Guest Professor of Marketing at the University of California, Los Angeles (Anderson Graduate School of Management). Peter has also taught doctoral-level courses in Alicante, Helsinki, Vienna, Innsbruck, and St. Gallen. He is a member of the Board of the European Institute of Advanced Studies in Management (EIASM) in Brussels. From 1997 to 2001, he was dean of the Department of Economics and vice-vice chancellor of the University of Groningen. In 1999, he became a member of the Royal Netherlands Academy of Arts and Sciences. Since 2004, he has also been an affiliated professor at the Johann Wolfgang Goethe Universität at Frankfurt am Main, Germany. He has authored or coauthored 20 books, including Mathematical Models in Marketing and Building Implementable Marketing Models, and Building Models for Marketing Decisions. Other examples of his published work can be found in Applied Economics, Journal of Marketing, Journal of Marketing Research, International Journal of Research in Marketing, Management Science, Marketing Science, Quantitative Marketing and Economics, Journal of Economic Psychology, International Journal of Forecasting, and Journal of Econometrics.
Jaap E. Wieringa is Associate Professor of Marketing at the University of Groningen, the Netherlands. He holds a PhD in Economics (1999) from the same university. During the years 1998–2000, he was employed as a senior consultant and scientific researcher at the Institute for Business and Industrial Statistics (IBIS UvA BV), a consultancy firm embedded within the University of Amsterdam. In 2001, he joined the Department of Marketing at the University of Groningen. Jaap’s work in the field of industrial statistics has been published in, among others, Journal of Chemometrics and Quality and Reliability Engineering International. He is coauthor of a Dutch book on the Six Sigma quality program. His publications in marketing include articles in International Journal of Research in Marketing, Marketing Letters, Journal of Service Research, and International Journal of Forecasting. The main focus of his current research is on pharmaceutical marketing, marketing model building, time-series analysis, and diffusion modeling.
Journal of Marketing Research, Volume 47, Number 1, February 2010
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