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

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  • 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

Suggested Citation

  • 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 (QME), Springer, vol. 2(4), pages 347-383, December.
  • Handle: RePEc:kap:qmktec:v:2:y:2004:i:4:p:347-383
    DOI: 10.1007/s11129-004-0137-x
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    Citations

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    Cited by:

    1. repec:eee:ijrema:v:29:y:2012:i:3:p:235-245 is not listed on IDEAS
    2. Lamey, L. & Deleersnyder, B. & Dekimpe, M.G. & Steenkamp, J-B.E.M., 2005. "The Impact of Business-Cycle Fluctuations on Private-Label Share," ERIM Report Series Research in Management ERS-2005-061-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 University Rotterdam.
    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. repec:eee:jouret:v:91:y:2015:i:3:p:516-532 is not listed on IDEAS
    5. Eunae Jung & Hyungun Sung, 2017. "The Influence of the Middle East Respiratory Syndrome Outbreak on Online and Offline Markets for Retail Sales," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-23, March.
    6. Newton, Joshua D. & Tsarenko, Yelena & Ferraro, Carla & Sands, Sean, 2015. "Environmental concern and environmental purchase intentions: The mediating role of learning strategy," Journal of Business Research, Elsevier, vol. 68(9), pages 1974-1981.
    7. repec:eee:ijrema:v:31:y:2014:i:4:p:425-433 is not listed on IDEAS
    8. repec:eee:joinma:v:24:y:2010:i:2:p:138-154 is not listed on IDEAS
    9. Lemmens, A. & Croux, C. & Dekimpe, M.G., 2007. "Consumer confidence in Europe : United in diversity," Other publications TiSEM ea8c3268-2c0b-4fcc-9d4a-6, Tilburg University, School of Economics and Management.
    10. 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.
    11. Jan-Benedict E. M. Steenkamp & Eric (Er) Fang, 2011. "The Impact of Economic Contractions on the Effectiveness of R&D and Advertising: Evidence from U.S. Companies Spanning Three Decades," Marketing Science, INFORMS, vol. 30(4), pages 628-645, July.
    12. Koen Pauwels & Dominique M. Hanssens, 2007. "Performance Regimes and Marketing Policy Shifts," Marketing Science, INFORMS, vol. 26(3), pages 293-311, 05-06.
    13. Pushan Dutt & V. Padmanabhan, 2011. "Crisis and Consumption Smoothing," Marketing Science, INFORMS, vol. 30(3), pages 491-512, 05-06.
    14. 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.
    15. repec:eee:jouret:v:87:y:2011:i:s1:p:s17-s28 is not listed on IDEAS
    16. Hojin Jung & Minjae Park & Kihoon Hong & Eunjung Hyun, 2016. "The Impact of an Epidemic Outbreak on Consumer Expenditures:An Empirical Assessment for MERS Korea," Sustainability, MDPI, Open Access Journal, vol. 8(5), pages 1-15, May.
    17. Lemmens, A. & Croux, C. & Dekimpe, M.G., 2005. "The European Consumer: United In Diversity?," ERIM Report Series Research in Management ERS-2005-022-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 University Rotterdam.
    18. Deleersnyder, B. & Dekimpe, M.G. & Steenkamp, J-B.E.M. & Leeflang, P.S.H., 2007. "The Role of National Culture in Advertising’s Sensitivity to Business Cycles: An Investigation Across All Continents," ERIM Report Series Research in Management ERS-2007-095-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 University Rotterdam.
    19. repec:eee:joinma:v:24:y:2010:i:2:p:121-137 is not listed on IDEAS

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