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The Impact of competitive context on the allocation of marketing mix resources

Author: Gatignon, Hubert ; Bowman, D.INSEAD Area: Marketing Series: Working Paper ; 98/43/MKT Publisher: Fontainebleau : INSEAD, 1998.Language: EnglishDescription: 30 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: While evidence exists that the efficiency of marketing instruments changes over time, there have been few attemps to develop and test theory as to the causes of theses changes. In this study, the author investigate differences in the effectiveness of a brand's marketing mix decision variables over time that may be caused by changes in competitive context due to brand entry, brand exit, and/or changes in feature offerings of brands. They test for asymmetries in market response over time due to differences in competitive context using data from two durables categories. A market share attraction model is developed where the parameters vary as a function of competitive context and of non-obeservable effects. Hence, the authors generalize varying parameter models to attraction models. Results show that competitive context is an important source if variation in elasticities over time, with evidence that the greater competitive density, the greater the market share sensitivity to price and distribution, and the smaller advertising effectiveness, ceteris paribus. Consequently, these results offer an explanation as to why managers should adopt different allocations of resources across marketing mix instruments over time.
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While evidence exists that the efficiency of marketing instruments changes over time, there have been few attemps to develop and test theory as to the causes of theses changes. In this study, the author investigate differences in the effectiveness of a brand's marketing mix decision variables over time that may be caused by changes in competitive context due to brand entry, brand exit, and/or changes in feature offerings of brands. They test for asymmetries in market response over time due to differences in competitive context using data from two durables categories. A market share attraction model is developed where the parameters vary as a function of competitive context and of non-obeservable effects. Hence, the authors generalize varying parameter models to attraction models. Results show that competitive context is an important source if variation in elasticities over time, with evidence that the greater competitive density, the greater the market share sensitivity to price and distribution, and the smaller advertising effectiveness, ceteris paribus. Consequently, these results offer an explanation as to why managers should adopt different allocations of resources across marketing mix instruments over time.

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