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Weathering Tight Economic Times: The Sales Evolution of Consumer Durables Over the Business Cycle

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Author Info

  • Barbara Deleersnyder

    ()

  • Marnik G. Dekimpe

    ()

  • Miklos Sarvary

    ()

  • Philip M. Parker

    ()

Abstract

Despite their obvious importance, not much marketing research focuses on how business-cycle fluctuations affect individual companies and/or industries. Often, one only has aggregate information on the state of the national economy, even though cyclical contractions and expansions need not have an equal impact on every industry, nor on all firms in that industry. Using recent time-series developments, we introduce various measures to quantify the extent and nature of business-cycle fluctuations in sales. Specifically, we discuss the concept of cyclical volatility, and derive a dynamic comovement elasticity between the economy as a whole and the cyclical fluctuations in various performance series. To further enhance our understanding of how consumers adjust their purchasing behavior across different phases of the business cycle, two other notable features related, respectively, to the relative size of the peaks and troughs and the rate of change in upward and downward parts of the cycle, are explicitly considered. Of specific interest in this respect are the notion of deepness and steepness asymmetry. We apply these concepts to a broad set (24) of consumer durables, for which we analyze the cyclical sensitivity in their sales evolution. In that way, we (i) derive a novel set of empirical generalizations, and (ii) test different marketing theory-based hypotheses on the underlying drivers of cyclical sensitivity. Consumer durables are found to be more sensitive to business-cycle fluctuations than the general economic activity, as expressed in an average cyclical volatility of more than four times the one in GNP, and an average dynamic comovement elasticity in excess of 2. This observation calls for an explicit consideration of cyclical variation in durable sales. Interestingly, the combined evidence across all durables suggests that asymmetry is present in the speed of up- and downward movements, as durable sales fall much quicker during contractions than they recover during economic expansions. Finally, key variables related to the industry’s pricing activities, the nature of the durable (convenience vs. leisure), and the stage in a product’s life cycle tend to moderate the extent of cyclical sensitivity in durable sales patterns. Copyright Springer Science+Business Media, Inc. 2004

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File URL: http://hdl.handle.net/10.1007/s11129-004-0137-x
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Bibliographic Info

Article provided by Springer in its journal Quantitative Marketing and Economics.

Volume (Year): 2 (2004)
Issue (Month): 4 (December)
Pages: 347-383

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Handle: RePEc:kap:qmktec:v:2:y:2004:i:4:p:347-383

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Web page: http://www.springerlink.com/link.asp?id=111240

Related research

Keywords: business cycles; sales evolution; consumer durables; time-series econometrics;

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Cited by:
  1. Millet, Kobe & Lamey, Lien & Van den Bergh, Bram, 2012. "Avoiding negative vs. achieving positive outcomes in hard and prosperous economic times," Organizational Behavior and Human Decision Processes, Elsevier, vol. 117(2), pages 275-284.
  2. Koen Pauwels & Imran Currim & Marnik Dekimpe & Dominique Hanssens & Natalie Mizik & Eric Ghysels & Prasad Naik, 2004. "Modeling Marketing Dynamics by Time Series Econometrics," Marketing Letters, Springer, vol. 15(4), pages 167-183, December.
  3. Kaytaz, Mehmet & Gul, Misra C., 2014. "Consumer response to economic crisis and lessons for marketers: The Turkish experience," Journal of Business Research, Elsevier, vol. 67(1), pages 2701-2706.
  4. Lemmens, A. & Croux, C. & Dekimpe, M.G., 2007. "Consumer confidence in Europe: United in diversity," Open Access publications from Tilburg University urn:nbn:nl:ui:12-194296, Tilburg University.
  5. Hampson, Daniel P. & McGoldrick, Peter J., 2013. "A typology of adaptive shopping patterns in recession," Journal of Business Research, Elsevier, vol. 66(7), pages 831-838.
  6. Pushan Dutt & V. Padmanabhan, 2011. "Crisis and Consumption Smoothing," Marketing Science, INFORMS, vol. 30(3), pages 491-512, 05-06.

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