Advertising and price effectiveness over the business cycle
AbstractIn this study, the authors conduct a systematic investigation on the evolution in the effectiveness of two important marketing mix instruments, advertising and price, over the business cycle. Analyses are based on 163 branded products in 37 mature CPG categories in the UK, and this for a period of 15 years. The data are a combination of (i) monthly national sales data, (ii) monthly advertising data, (iii) data on the general economic conditions, and (iv) consumer survey data. Consumers are shown to be more price sensitive during contractions. In addition, spending patterns will be less consistent, implying smaller brand loyalty. Advertising elasticities, however, do not seem to be affected by economic downturns. Product involvement was shown to be an influential moderator of the final effect of advertising, price and carry-over effects on sales. Finally, although short run effectiveness of price differs between expansions and contractions, the long run effectiveness of both advertising and price is not altered by differences in the general economic conditions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Katholieke Universiteit Leuven in its series Open Access publications from Katholieke Universiteit Leuven with number urn:hdl:123456789/229404.
Date of creation: Mar 2009
Date of revision:
Contact details of provider:
Web page: http://www.kuleuven.be
advertising; price; effectiveness; business cycle; time-series econometrics; Bayesian inference;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-13 (All new papers)
- NEP-BEC-2010-03-13 (Business Economics)
- NEP-MIC-2010-03-13 (Microeconomics)
- NEP-MKT-2010-03-13 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barbara Deleersnyder & Marnik G. Dekimpe & Miklos Sarvary & Philip M. Parker, 2004.
"Weathering Tight Economic Times: The Sales Evolution of Consumer Durables Over the Business Cycle,"
Quantitative Marketing and Economics,
Springer, vol. 2(4), pages 347-383, December.
- Deleersnyder, B. & Dekimpe, M.G. & Sarvary, M. & Parker, P.M., 2003. "Weathering Tight Economic Times: The Sales Evolution Of Consumer Durables Over The Business Cycle," Research Paper ERS-2003-046-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
- Kostas Axarloglou, 2003. "The Cyclicality of New Product Introductions," The Journal of Business, University of Chicago Press, vol. 76(1), pages 29-48, January.
- Dekimpe, M.G. & Hanssens, D., 1995. "The persistence of marketing effects on sales," Open Access publications from Tilburg University urn:nbn:nl:ui:12-358916, Tilburg University.
- James H. Stock & Mark W. Watson, 1998.
"Business Cycle Fluctuations in U.S. Macroeconomic Time Series,"
NBER Working Papers
6528, National Bureau of Economic Research, Inc.
- Stock, James H. & Watson, Mark W., 1999. "Business cycle fluctuations in us macroeconomic time series," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 1, pages 3-64 Elsevier.
- Allenby, Greg M & Jen, Lichung & Leone, Robert P, 1996. "Economic Trends and Being Trendy: The Influence of Consumer Confidence on Retail Fashion Sales," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 103-11, January.
- David K. Backus & Patrick J. Kehoe, 1991.
"International evidence on the historical properties of business cycles,"
145, Federal Reserve Bank of Minneapolis.
- Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-88, September.
- David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
- Rotemberg, Julio J. & Woodford, Michael, 1999.
"The cyclical behavior of prices and costs,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135
- Kamakura, Wagner A. & Gessner, Guy, 1986. "Consumer sentiment and buying intentions revisited: a comparison of predictive usefulness," Journal of Economic Psychology, Elsevier, vol. 7(2), pages 197-220, June.
- Hoyer, Wayne D & Brown, Steven P, 1990. " Effects of Brand Awareness on Choice for a Common, Repeat-Purchase Product," Journal of Consumer Research, University of Chicago Press, vol. 17(2), pages 141-48, September.
- Gerard J. Tellis & Philip Hans Franses, 2006. "Optimal Data Interval for Estimating Advertising Response," Marketing Science, INFORMS, vol. 25(3), pages 217-229, 05-06.
- Petty, Richard E & Cacioppo, John T & Schumann, David, 1983. " Central and Peripheral Routes to Advertising Effectiveness: The Moderating Role of Involvement," Journal of Consumer Research, University of Chicago Press, vol. 10(2), pages 135-46, September.
- Deleersnyder, B & Dekimpe, Marnik & Sarvary, M & Parker, PM, 2004. "Weathering tight economic times: the sales evolution of consumer durables over the business cycle," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/121459, Katholieke Universiteit Leuven.
- Hawkins, Scott A & Hoch, Stephen J, 1992. " Low-Involvement Learning: Memory without Evaluation," Journal of Consumer Research, University of Chicago Press, vol. 19(2), pages 212-25, September.
- Hoyer, Wayne D, 1984. " An Examination of Consumer Decision Making for a Common Repeat Purchase Product," Journal of Consumer Research, University of Chicago Press, vol. 11(3), pages 822-29, December.
- Engle, Robert F, 1974.
"Band Spectrum Regression,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 1-11, February.
- Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
- Bloch, Peter H & Sherrell, Daniel L & Ridgway, Nancy M, 1986. " Consumer Search: An Extended Framework," Journal of Consumer Research, University of Chicago Press, vol. 13(1), pages 119-26, June.
- Deleersnyder, B. & Dekimpe, M.G. & Sarvary, M. & Parker, P., 2004. "Weathering tight economic times: The sales evolution of consumer durables over the business cycle," Open Access publications from Tilburg University urn:nbn:nl:ui:12-358555, Tilburg University.
- Punj, Girish N & Staelin, Richard, 1983. " A Model of Consumer Information Search Behavior for New Automobiles," Journal of Consumer Research, University of Chicago Press, vol. 9(4), pages 366-80, March.
- Ashwin Aravindakshan & Prasad Naik, 2011. "How does awareness evolve when advertising stops? The role of memory," Marketing Letters, Springer, vol. 22(3), pages 315-326, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carl Demeyere).
If references are entirely missing, you can add them using this form.