The Long-term Effect of Marketing Strategy on Brand Performance

M. Berk Ataman, Tilburg University
Harald J. van Heerde, Tilburg University
Carl F. Mela, Duke University1

Abstract

Recently, increased attention has been devoted to the long-term role that advertising and pricing strategy plays in shaping brand performance. The authors supplement this research by considering the entire marketing mix (pricing, promotion, product, and place) over a large number of categories. To do this, the authors combine five years of advertising and weekly storelevel scanner data for 25 product categories and 70 brands in 184 stores in France. Using a multivariate dynamic linear transfer function model, the authors find that most variation in brands’ quantity premiums (a brand’s incremental sales relative to brands that are priced and promoted the same way) can be ascribed to advertising and discounting. In contrast, most variation in brands’ margin premiums (the inverse of the absolute price elasticity) can be apportioned to distribution and product. Overall, they find that discounts are deleterious for brands while product innovation is beneficial. The authors conclude with recommendations regarding long-term strategies for managing brands.