Modeling Dynamic Effects of the Marketing Mix on Market Shares

32 Pages Posted: 26 Aug 2006

See all articles by D. Fok

D. Fok

Econometric Institute - Erasmus University Rotterdam; Erasmus Research Institute of Management (ERIM); Tinbergen Institute Rotterdam

Richard Paap

Erasmus University Rotterdam (EUR) - Department of Econometrics; Tinbergen Institute; Erasmus Research Institute of Management (ERIM)

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics

Date Written: 15 2003 5,

Abstract

To comprehend the competitive structure of a market, it is important to understand the short-run and long-run effects of the marketing mix on market shares. A useful model to link market shares with marketing-mix variables, like price and promotion, is the market share attraction model. In this paper we put forward a representation of the attraction model, which allows for explicitly disentangling long-run from short-run effects. Our model also contains a second level, in which these dynamic effects are correlated with various brand and product category characteristics.Based on the findings in for example Nijs et al. (2001), we postulate the expected signs of these correlations. We fit our resultant Hierarchical Bayes attraction model to data on seven categories in two geographical areas. This data set spans a total of 50 brands. Our main finding is that, in absolute sense, the short-run price elasticity usually exceeds the long-run effect. Moreover, we find that the longrun price effects are strongly correlated with relative price and coupon intensity of a brand.

Keywords: market shares, marketing mix, long-term effects, hierarchical bayes

JEL Classification: M, M31, C44

Suggested Citation

Fok, Dennis and Paap, Richard and Franses, Philip Hans, Modeling Dynamic Effects of the Marketing Mix on Market Shares (15 2003 5,). ERIM Report Series Reference No. ERS-2003-044-MKT. Available at SSRN: https://ssrn.com/abstract=423650

Dennis Fok (Contact Author)

Econometric Institute - Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1333 (Phone)
+31 10 408 9162 (Fax)

Tinbergen Institute Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Richard Paap

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Tinbergen Institute ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1278 (Phone)
+31 10 408 9162 (Fax)

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