New Products, Sales Promotions, and Firm Value: The Case of the Automobile Industry

Koen Pauwels, Jorge Silva-Risso, Shuba Srinivasan and Dominique M. Hanssens

Chapter 8 in Long-Term Impact of Marketing:A Compendium, 2018, pp 287-324 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Year after year, managers strive to improve financial performance and firm value through marketing actions such as new product introductions and promotional incentives. This study investigates the short- and long-term impact of such marketing actions on financial metrics, including top-line, bottom-line, and stock market performance. The authors apply multivariate time-series models to the automobile industry, in which both new product introductions and promotional incentives are considered important performance drivers. Notably, whereas both marketing actions increase top-line firm performance, their long-term effects strongly differ for the bottom line. First, new product introductions increase long-term financial performance and firm value, but promotions do not. Second, investor reaction to new product introduction grows over time, indicating that useful information unfolds in the first two months after product launch. Third, product entry in a new market yields the highest top-line, bottom-line, and stock market benefits. Managers may use these results to justify new product efforts and to weigh short- and long-term consequences of promotional incentives.

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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