The long run, causality, and forecasting in the advertising‐sales relationship

Abstract

Co-integration analysis is used in a study of the advertising and sales relationship using the Lydia Pinkham data set. The series are shown to have a valid long-run relationship while Granger-causality runs in both directions. The latter is found by using a causality test involving the cointegration restrictions which seem to constitute a crucial part of such tests in the case of co-integrated variables. A comparison with previous models shows that forecasting co-integrated series is more accurate with errorcorrection systems, especially in the case of multi-step forecasting.

Price leadership within a marketing channel: A cointegration study

“…. ., T), do not fluctuate seemingly randomly around deterministic terms (e.g., a constant or a linear trend), but their first differences, Dp it = p it Àp i,tÀ1 and Dw it = w it Àw i,tÀ1 , do fluctuate apparently randomly round such terms (see, for example, Baghestani, 1991;Bronnenberg, Mahajan, & Vanhonacker, 2000;DeKimpe & Hanssens, 1995a,b, 1999, 2000Franses, 1991Franses, , 1994Franses, Srinivasan, & Boswijk, 2001;Granger & Newbold, 1986;Grewal et al, 2001;Nelson & Plosser, 1982;Srinivasan, Popkowski Leszczyc, & Bass, 2000;Zanias, 1994). Consequently, the variables in levels, p it and w it , are supposed to be nonstationary (i.e., evolving), while in first differences they will be stationary (i.e., transitory, for example, mean-reverting).…”

Empirical Study on the Relationship between Market Share, Advertising Density and Ratio of Sales

“…To determine the optimal advertising investment to maximize the enterprises' profit is a very important decision in advertising management mechanism. By employing co-integration analysis based on the time series data of advertising expenditure and sales of Lydia Pinkham, Zanias (1994) confirmed the existence of long-term equilibrium relationship between the enterprises' advertising investment and profit (Zanias, 1994). Elliott (2001) verified the applicability of that conclusion in the food industry and considers that there was an equilibrium relationship between advertising expenditure and sales before the market reached a saturation point (Elliott, 2001).…”

The impact of promotional mix on profit in the B2B sector

“…After this study many researchers worked on the Lydia Pinkham Company data. One of them Zanias (1994) found bivariate granger causality between advertising and sales in the said company and also concluded from the analysis that the two series also have a long-term relationship among them. Kamber (2002) also found out that advertising expenditures and sales share a particular relationship and can be measured after controlling factors like company size, past sales growth, etc.…”