Advertising and Price Effectiveness over the Business Cycle

Abstract

In 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.

Does Price Elasticity Vary with Economic Growth? A Cross-Category Analysis

“…These correlations yield our first broad empirical pattern: In general, price sensitivity is countercyclical, consistent with the intuition that consumers become more price sensitive during weaker economic periods. This result is consistent with Gijsenberg et al (2010), who find price sensitivity tends to increase during economic downturns.…”

“…Overall, we believe that our results provide a more nuanced understanding of how price sensitivity varies with the business cycle. Whereas prior studies (e.g., Estalami, Lehmann, and Holden 2001;Gijsenberg et al 2010;Lamey et al 2007) have documented that price sensitivity rises on average when the economy is weak, we show that the variation around this average is substantial. Furthermore, the variation is related to readily identifiable features of the category: average price sensitivity driven by category share of wallet.…”

“…We find that, on average, price sensitivity rises when the macroeconomy is weak, as measured by gross domestic product (GDP) growth. This result is consistent with prior marketing literature that uses aggregate data to explore the relationship between price sensitivity and the business cycle (e.g., Estalami, Lehmann, and Holden 2001; Gijsenberg et al 2010; Lamey et al 2007) and with the large-scale surveys in Kamakura and Du (2012), who find that consumer tastes and budget allocations shift systematically with variation in GDP growth.…”

The influence of consumer confidence on inter-format competition: An analysis based on the French Consumer Confidence Index

“…Products, innovations, and brands Prix Distribution Advertising Hanna et al (1975) x x Van Raaij and Eilander (1983) x x Hoch and Banerji (1993) x Nandan and Dickinson (1994) x x Quelch and Harding (1996) x Estelami et al (2001) x x Axarloglou (2003) x Deleersnyder et al (2004) x Lamey et al (2007) x Flatters and Willmott (2009) x x Steenkamp and Fang (2011) x x Lamey et al 2012x x Millet et al (2012) x Kaytaz and Gul (2014) x Briesch et al (2009) x Albion and Farris (1981) x x Chevalier and Scharfstein (1996) x Taylor (1999) x Gijsenberg et al (2010) x x Ma et al 2011x Gordon et al (2013) x Van Heerde et al 2013x x Hampson and McGoldrick (2013) x Kaswengi and Diallo (2015) x x Picard (2001) x Hoch et al (2002) x Kamber (2002) x Frankenberger and Graham (2003) x Srinivasan et al (2005) x Srinivasan and Lilien (2009) x Tellis and Tellis (2009) x Deleersnyder et al (2009) x Srinivasan et al (2011) x Graham and Frankenberger (2011) x Sethuraman et al (2011) x Özturan et al (2014) x anticipated by consumers. The second area concerns research on the role of the economic context (Lamey et al, 2007(Lamey et al, , 2012Steenkamp and Fang, 2011).…”

Impact du moral des ménages sur la concurrence inter-formats: une analyse à partir de l’indice de l’INSEE

“…Cleeren et al Hanna et al (1975) x x Van Raaj et Eilander (1983) x x Hoch et Banerji (1993) x Nandan et Dickinson (1994) x x Quelch et Harding (1996) x Estelami et al 2001x x Axarloglou 2003x Deleersnyder et al 2004x Lamey et al (2007) x Flatters et Willmott (2009) x x Steenkamp et Fang 2011x x Lamey et al (2012) x x Millet et al 2012x Kaytaz et Gul (2014) x Briesch et al 2009x Albion et Farris (1981) x x Chevalier et Scharfstein (1996) x Taylor (1999) x Gijsenberg et al (2010) x x Ma et al 2011x Gordon et al (2013) x Van Heerde et al 2013x x Hampson et McGoldrick (2013) x Kaswengi et Diallo (2015) x x Picard (2001) x Hoch et al (2002) x Kamber (2002) x Frankenberger et Graham (2003) x Srinivasan et al (2005) x Srinivasan et Lilien (2009) x Tellis et Tellis (2009) x Deleersnyder et al 2009x Srinivasan et al 2011x Graham et Frankenberger (2011) x Sethuraman et al 2011x Özturan, Özsomer et Pieters 2014x (a) Les variations du moral des ménages affectent-elles le montant dépensé au niveau des formats de magasin, au-delà de l'impact des variables marketing conventionnelles (exemple, le marketing mix) ? Si oui, comment se manifestent-t-elles ?…”