A Customized Market Response Model: Development, Estimation, and Empirical Testing

Journal of the Academy of Marketing Science, Volume 16, Issue 1, pp 128-140, 1988

13 Pages Posted: 27 May 2016

See all articles by Vithala R. Rao

Vithala R. Rao

Cornell University - Samuel Curtis Johnson Graduate School of Management

Yoram Jerry Wind

University of Pennsylvania - Marketing Department

Wayne S. DeSarbo

Pennsylvania State University

Date Written: March 1, 1988

Abstract

A customized, stepwise, log-linear, distributed lag, restricted market response model is proposed to estimate the effects of various elements of promotion expenditures on sales in the presence of potentially significant effects due to trend and/or seasonality when using time-series data. As distinct from standardized software packages, the customization offers management several benefits: (a) an (optional) imposition of prior restrictions on the directions of the coefficient variables; (b) an empirical determination of the lag structure for selected variables; (c) the detrending of the data to allow for the assessment of incremental marketing mix effects above trend; and (d) a simplified sensitivity analysis. The model is empirically tested and validated using sales data for a brand where the impact of several marketing mix variables is estimated and investigated via policy simulations. A comparison of these results with those obtained from a corresponding unrestricted model illustrates the advantages of this approach. Finally, the limitations of this procedure and directions for future research are discussed.

Suggested Citation

Rao, Vithala R. and Wind, Yoram Jerry and DeSarbo, Wayne S., A Customized Market Response Model: Development, Estimation, and Empirical Testing (March 1, 1988). Journal of the Academy of Marketing Science, Volume 16, Issue 1, pp 128-140, 1988, Available at SSRN: https://ssrn.com/abstract=2784889

Vithala R. Rao

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Yoram Jerry Wind

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

Wayne S. DeSarbo (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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