Long-term Profit Impact Of Integrated Marketing Communications Program

Raman Kalyan and Naik Prasad A.
Additional contact information
Raman Kalyan: Loughborough University, K.Raman@lboro.ac.uk
Naik Prasad A.: University of California Davis, panaik@ucdavis.edu

Review of Marketing Science, 2004, vol. 2, issue 1, 23

Abstract: The concept of Integrated Marketing Communications (IMC) emphasizes the role of synergy, which arises when the combined effect of multiple activities exceeds the sum of their individual effects. In this paper, we investigate the effects of synergy on the profitability of IMC programs in uncertain markets. We develop a dynamic multimedia model that incorporates both synergy and uncertainty, and use it to determine the optimal IMC program. Our results generalize previous findings to uncertain markets, illuminate the profit implications of IMC programs, and explain the catalytic effects of synergy in IMC contexts. Specifically, we find that the expected long-term profit of the advertised brand increases as synergy increases. Furthermore, managers should allocate a non-zero budget to a catalytic activity even if it is completely ineffective. Finally, these findings continue to hold in an uncertain duopoly market.

Keywords: Marketing Communications; Stochastic Optimal Control; Synergy (search for similar items in EconPapers)
Date: 2004
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DOI: 10.2202/1546-5616.1014

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