Sustained Spending and Persistent Response: A New Look at Long-Term Marketing Profitability

Marnik G. Dekimpe and Dominique M. Hanssens

Chapter 5 in Long-Term Impact of Marketing:A Compendium, 2018, pp 143-186 from World Scientific Publishing Co. Pte. Ltd.

Abstract: An intuitively appealing decision rule is to allocate a company’s scarce marketing resources to where they have the greatest long-term benefit. This principle, however, is easier to accept than it is to execute, because long-run effects of marketing spending are difficult to estimate. The authors address this problem by examining the behavior of market response and marketing spending over time and identify four common strategic scenarios: business as usual, hysteresis in response, escalation, and evolving business practice. The authors explain and illustrate why each scenario can occur in practice and describe its positive and negative consequences for long-term profitability. The authors propose to use mul-tivariate persistence measures to identify which of the four strategic scenarios is taking place and illustrate this approach in the pharmaceutical and packaged-food industries. The results substantiate the authors’ proposition that the strategic scenario is a major determinant of marketing effectiveness and long-term profitability. This conclusion sets up a substantial agenda for further research.

Keywords: Marketing Impact; Long Term Marketing Effects; Marketing Science; Time-series Models (search for similar items in EconPapers)
JEL-codes: C01 M31 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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