Managing Brands

In 2004 alone, US firms spent $648BB on their marketing communications, representing 6% of the US Gross Domestic Product (Promotion Marketing Association, 2004). Accordingly, marketing expenditures play a substantial role in the economy and the effect of these expenses on brands is of central interest to many firms. Research in marketing has made significant headway in understanding the role marketing plays in shaping demand. While recently there has been an increasing emphasis on the long-term effects of marketing strategy on brands, we are aware of no studies that a) compare the relative long-term effects of the entire marketing mix (pricing, promotion, product, and place) in unison and b) consider these effects over a large number of categories. Accordingly, a critical question remains: which elements of the marketing mix are most critical in managing mature brands? This question has endured for decades because its resolution requires extensive data and advanced modeling techniques. In this paper, we aim to obtain a more complete view of what drives brand strength by considering all four elements of marketing mix in unison. We construct a Dynamic Linear Model that allows us to understand how a brands quantity premium (baseline sales) and marging premium (inverse of price elaticity) evolve over time as a function of marketing activity. The model is calibrated by combining detailed advertising data from TNS Secodip with weekly store-level scanner data from Information Resources, covering a time horizon of 265 weeks, 25 product categories, and 560 stores from a French national sample. The results suggest that advertising and new product activities are the primary drivers of brand performance. Contact info: dr. Katrijn Gielens; kgielens@rsm.nl, +31 010 4088635