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Marketing - Branding

 

 
Brand Performance Volatility from Marketing Spending While volatile marketing spending, as opposed to even-level spending, may improve a brandís financial performance, it can also increase the volatility of performance, which is not a desirable outcome. This paper analyzes how revenue and cash-flow volatility are influenced by own and competitive marketing spending volatility, by the level of marketing spending, by the responsiveness of own marketing spending, and by competitive response. From market response theory, the authors derive propositions about the influence of these variables on revenue and cash-flow volatility. The direction of effects, i.e. whether volatility increases or decreases, largely depends on the type and intensity of competitive interaction.

Based on a broad sample of 99 pharmaceutical brands in four clinical categories and four European countries, the authors test for the empirical relevance of the propositions and assess the magnitude of the different sources of marketing-induced performance volatility. The authors find broad support for the predicted volatility effects. Volatility elasticities may be as large as 1.10 (cash-flow variance with respect to marketing responsiveness).

The findings imply that common volatility-increasing marketing practices such as price promotions or volatile advertising plans may be effective at the top-line, but could turn out to be ineffective after all costs are taken into account. pdf 2012

 

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Status: 15. November 2012