Leonord M. Lodish
Executive Summary
In 1991, only a few years after Information Resources introduced scanner data, the author of this comment was asked to advise a client service team of Information Resources, Inc., personnel to respond to a challenge from a senior marketing executive of one of their largest packaged goods clients whose opinion was, "I got all I needed to run our brands from the [old] bimonthly national and regional data." He challenged the team to show how the new scanner data could be used to make more money for his brands. The team was given one national detergent brand ("Old Yeller") that had been languishing and was told to develop data-based recommendations that would improve the profit contribution of the brand. He also asked the team to conduct new analyses that were not possible with the old bimonthly data. The team quickly turned to geographical analyses to make recommendations that had the most profit increase potential. They had observed consistent wide geographical variation in market response to marketing-mix variables, such as price and promotion.
Bronenberg, Dhar, and Dube (2007), show that there is a large geographic variation in market shares and perceived quality levels of a large sample of "national" and "regional" brands across many consumer packaged goods categories. They demonstrate that their geographical findings are new to academics.
This note shows that practitioners have been ahead of academics in this basic understanding. The author then shows how one point of real leverage is to allocate marketing resources geographically on the basis of market response. For practitioners, the geographical differences in market response are much more important than share differences because they are directly actionable and can impact profitability. The idea is to take resources away from low-response markets and put them into higher-response markets. The example in the note shows how "Old Yeller" could get 3% more total national revenue from their promotions with no cost increase by reallocating promotions geographically.
There seems to be as much or more variation in market response to resources such as advertising and promotion than there is in market shares. The note concludes with a plea to have more interaction between academics and practitioners so that it does not take 15 years for important insights to cross from practice to academia (or vice versa).
Biography
Leonard M. Lodish is Samuel R. Harrell Professor, Professor of Marketing, and Vice Dean, Wharton West, in the Wharton School at the University of Pennsylvania. He also is cofounder (in 1978) and leader of Wharton’s Global Consulting Practicum, which involves MBA student teams from Wharton and global partner schools doing real cross-border projects to add significant value to companies in Israel, India, China, Chile, Peru, and Colombia. Professor Lodish’s primary research and consulting areas are in entrepreneurial marketing; strategic and tactical marketing resource planning; marketing decision support systems; and applications in firm/marketing strategy, sales force, advertising, and promotion planning. Len has developed models and decision support systems that have been syndicated to worldwide use. They include MEDIAC® for media planning, CALLPLAN® for sales force deployment, and PROMOTER® and PROMOTIONSCAN® for promotion planning and evaluation. He has published more than 50 articles and is active as an editor in leading marketing and management science journals.
Journal of Marketing Research, Vol. XLIV, No. 1, February 2007
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