1
MARKETING MIX MANAGEMENT – MARKETING MIX EFFECTIVENESS
Contents
MARKETING MIX MANAGEMENT – MARKETING MIX EFFECTIVENESS ................................................ 1
Chapter 1. Introduction to market response models ...................................................................................... 3
1. Capabilities to determine the influence of marketing ............................................................................. 3
2. Market response models ....................................................................................................................... 3
2.1 Specification .................................................................................................................................... 4
2.2 Estimation........................................................................................................................................ 6
2.3 Testing and validation ...................................................................................................................... 6
2.4 Application ....................................................................................................................................... 6
2.5 The modeling gap ............................................................................................................................ 7
3. How to read modeling papers?.............................................................................................................. 7
3.1 Application to case .......................................................................................................................... 8
4. Model building: Coca-Cola case ............................................................................................................ 8
4.1 Question 1: Were the advertising campaigns and price promotions effective? ................................. 9
4.1.1 Model building steps – Step 1: Specification ................................................................................. 9
4.1.2 Model building steps – Step 2: Estimation .................................................................................. 10
4.1.3 Model building steps – Step 3: Testing and validation ................................................................. 11
4.1.4 Model building steps – Step 4: Application.................................................................................. 12
4.2 Question 2: Are the sales of Coca Cola and Cola Light cannibalized? ........................................... 12
4.2.1 Model building steps – Step 1: Specification ............................................................................... 12
4.2.2 Model Building steps – Step 2: Estimation .................................................................................. 13
4.2.3 Model building steps – Step 3: Testing and validation ................................................................. 13
4.2.4 Model building steps – Step 4: Application.................................................................................. 13
5. Literature............................................................................................................................................. 13
Hoofdstuk 2. Advertising ............................................................................................................................. 14
1. Paper 1: How Well Does Advertising Work?........................................................................................ 14
1.1 Research question......................................................................................................................... 14
1.2 Conceptual framework ................................................................................................................... 14
1.3 Data and methodology................................................................................................................... 15
1.4 Results .......................................................................................................................................... 15
1.5 Reflection ...................................................................................................................................... 18
2. Paper 2: The Direct and Indirect Effects of Advertising Spending on Firm Value ................................. 18
2.1 Research question......................................................................................................................... 18
2.2 Conceptual framework ................................................................................................................... 19
2.3 Data............................................................................................................................................... 22
2.4 Methodology .................................................................................................................................. 22
2.5 Resultaten ..................................................................................................................................... 23
2.6 Reflection ...................................................................................................................................... 25
3. Literature............................................................................................................................................. 25
, 2
Hoofdstuk 3. Price ...................................................................................................................................... 26
1. Paper 1: The effect of price (Bijmolt et al. 2005) .................................................................................. 26
1.1 Research question......................................................................................................................... 27
1.2 Conceptual framework ................................................................................................................... 27
1.3 Data and modeling ........................................................................................................................ 28
1.4 Results .......................................................................................................................................... 28
1.5 Reflection ...................................................................................................................................... 29
2. Price promotions (Gedenk et al., 2010) ............................................................................................... 29
3. Paper 2: Who benefits from price promotions? (Srinivasan et al., 2004) ............................................. 32
3.1 Research question......................................................................................................................... 32
3.2 Conceptual framework ................................................................................................................... 32
3.3 Data and modeling ........................................................................................................................ 32
3.4 Methodology .................................................................................................................................. 33
3.5 Results .......................................................................................................................................... 34
3.6 Reflection ...................................................................................................................................... 36
4. Literature............................................................................................................................................. 37
Hoofdstuk 4. Customer Lifetime Value ........................................................................................................ 37
1. RFM model ......................................................................................................................................... 38
2. Customer lifetime value ....................................................................................................................... 38
3. Paper 1: Customer lifetime value ........................................................................................................ 39
3.1 Research question......................................................................................................................... 39
3.2 Conceptual framework ................................................................................................................... 39
3.3 Data and modeling ........................................................................................................................ 40
3.4 Methodology .................................................................................................................................. 42
3.5 Results .......................................................................................................................................... 43
3.6 Reflection ...................................................................................................................................... 45
4. Literature............................................................................................................................................. 46
Possible exam questions ............................................................................................................................ 46
Question 1 .............................................................................................................................................. 46
Question 2 .............................................................................................................................................. 46
, 3
Chapter 1. Introduction to market response models
Influence of marketing decreases
• Marketing function lower in hierarchy
• Marketing issues get less time in the board room
• Marketing is seen as a cost and not as an investment
• Strategic marketing decisions are made in other departments
• Role of the CMO has decreased
• CMOs “in the hot seat”
1. Capabilities to determine the influence of marketing
5 characteristics on the left that possibly determine the influence of marketing. These are some important
characteristics for marketers to have influence in the company.
Findings of the first research:
• The more innovative you are, the
more marketing influence you have
• Accountability: you need to show
the value of your decisions
Second research:
• With a larger sample, there was a
new factor that became important.
• Integration/cooperation with other
departments becomes a
determinant. It is important that the
marketer speaks their language.
E.g. talk to the financial director in
numbers of how well the marketing
did.
2. Market response models
Link input variables to output measures.
What is the impact of marketing decisions on output variables such as sales, market shares, …?
Quantify marketing problems.
Advantages of the use of market response models
1. Better decisions
2. Better understanding of the environment
3. Improve the way decision makers use existing information
4. Improve data collection
5. Observing changes in the environment
, 4
Model building steps (4 steps to building the marketing response models):
1. Specification
2. Estimation
3. Testing and validation
4. Application
2.1 Specification
Inputs:
• Marketing decision variables
• Independent variables
Output(s):
• What is the target? Increase sales, build brand awareness, increase market share?
• Dependent variable(s)
Environmental factors:
• Which other factors influence the output(s)?
• Control variables
Express in terms of equation:
• B0 is the contant
Think about subscript -> what is your observation:
• t for time and i for individual
Error term
Think about functional form
• Transformations for non-linear relationships (squared/ln/…)
• In which way are they related? Lineair, U-shape, squared, …
• How do you expect the inputs to relate to the output(s)
Possible functional forms (among others):
1. Linear function
2. Decreasing return (Impact of an increase of one unit in input is very high in the beginning. When
there is already an input in the marketing, the influence of an extra unit has less impact then the
beginning.)
3. Increasing return (Impact on the output is small in the beginning. If there is already some inmput in
the market, an extra unit gives you a lot of impact.)
4. S-shaped. Combination of graph 2 and 3. In the first part there is increasing returns, then there is a
break point where the decreasing return begins.
=> These are the 4 main ones, there are a lot more
MARKETING MIX MANAGEMENT – MARKETING MIX EFFECTIVENESS
Contents
MARKETING MIX MANAGEMENT – MARKETING MIX EFFECTIVENESS ................................................ 1
Chapter 1. Introduction to market response models ...................................................................................... 3
1. Capabilities to determine the influence of marketing ............................................................................. 3
2. Market response models ....................................................................................................................... 3
2.1 Specification .................................................................................................................................... 4
2.2 Estimation........................................................................................................................................ 6
2.3 Testing and validation ...................................................................................................................... 6
2.4 Application ....................................................................................................................................... 6
2.5 The modeling gap ............................................................................................................................ 7
3. How to read modeling papers?.............................................................................................................. 7
3.1 Application to case .......................................................................................................................... 8
4. Model building: Coca-Cola case ............................................................................................................ 8
4.1 Question 1: Were the advertising campaigns and price promotions effective? ................................. 9
4.1.1 Model building steps – Step 1: Specification ................................................................................. 9
4.1.2 Model building steps – Step 2: Estimation .................................................................................. 10
4.1.3 Model building steps – Step 3: Testing and validation ................................................................. 11
4.1.4 Model building steps – Step 4: Application.................................................................................. 12
4.2 Question 2: Are the sales of Coca Cola and Cola Light cannibalized? ........................................... 12
4.2.1 Model building steps – Step 1: Specification ............................................................................... 12
4.2.2 Model Building steps – Step 2: Estimation .................................................................................. 13
4.2.3 Model building steps – Step 3: Testing and validation ................................................................. 13
4.2.4 Model building steps – Step 4: Application.................................................................................. 13
5. Literature............................................................................................................................................. 13
Hoofdstuk 2. Advertising ............................................................................................................................. 14
1. Paper 1: How Well Does Advertising Work?........................................................................................ 14
1.1 Research question......................................................................................................................... 14
1.2 Conceptual framework ................................................................................................................... 14
1.3 Data and methodology................................................................................................................... 15
1.4 Results .......................................................................................................................................... 15
1.5 Reflection ...................................................................................................................................... 18
2. Paper 2: The Direct and Indirect Effects of Advertising Spending on Firm Value ................................. 18
2.1 Research question......................................................................................................................... 18
2.2 Conceptual framework ................................................................................................................... 19
2.3 Data............................................................................................................................................... 22
2.4 Methodology .................................................................................................................................. 22
2.5 Resultaten ..................................................................................................................................... 23
2.6 Reflection ...................................................................................................................................... 25
3. Literature............................................................................................................................................. 25
, 2
Hoofdstuk 3. Price ...................................................................................................................................... 26
1. Paper 1: The effect of price (Bijmolt et al. 2005) .................................................................................. 26
1.1 Research question......................................................................................................................... 27
1.2 Conceptual framework ................................................................................................................... 27
1.3 Data and modeling ........................................................................................................................ 28
1.4 Results .......................................................................................................................................... 28
1.5 Reflection ...................................................................................................................................... 29
2. Price promotions (Gedenk et al., 2010) ............................................................................................... 29
3. Paper 2: Who benefits from price promotions? (Srinivasan et al., 2004) ............................................. 32
3.1 Research question......................................................................................................................... 32
3.2 Conceptual framework ................................................................................................................... 32
3.3 Data and modeling ........................................................................................................................ 32
3.4 Methodology .................................................................................................................................. 33
3.5 Results .......................................................................................................................................... 34
3.6 Reflection ...................................................................................................................................... 36
4. Literature............................................................................................................................................. 37
Hoofdstuk 4. Customer Lifetime Value ........................................................................................................ 37
1. RFM model ......................................................................................................................................... 38
2. Customer lifetime value ....................................................................................................................... 38
3. Paper 1: Customer lifetime value ........................................................................................................ 39
3.1 Research question......................................................................................................................... 39
3.2 Conceptual framework ................................................................................................................... 39
3.3 Data and modeling ........................................................................................................................ 40
3.4 Methodology .................................................................................................................................. 42
3.5 Results .......................................................................................................................................... 43
3.6 Reflection ...................................................................................................................................... 45
4. Literature............................................................................................................................................. 46
Possible exam questions ............................................................................................................................ 46
Question 1 .............................................................................................................................................. 46
Question 2 .............................................................................................................................................. 46
, 3
Chapter 1. Introduction to market response models
Influence of marketing decreases
• Marketing function lower in hierarchy
• Marketing issues get less time in the board room
• Marketing is seen as a cost and not as an investment
• Strategic marketing decisions are made in other departments
• Role of the CMO has decreased
• CMOs “in the hot seat”
1. Capabilities to determine the influence of marketing
5 characteristics on the left that possibly determine the influence of marketing. These are some important
characteristics for marketers to have influence in the company.
Findings of the first research:
• The more innovative you are, the
more marketing influence you have
• Accountability: you need to show
the value of your decisions
Second research:
• With a larger sample, there was a
new factor that became important.
• Integration/cooperation with other
departments becomes a
determinant. It is important that the
marketer speaks their language.
E.g. talk to the financial director in
numbers of how well the marketing
did.
2. Market response models
Link input variables to output measures.
What is the impact of marketing decisions on output variables such as sales, market shares, …?
Quantify marketing problems.
Advantages of the use of market response models
1. Better decisions
2. Better understanding of the environment
3. Improve the way decision makers use existing information
4. Improve data collection
5. Observing changes in the environment
, 4
Model building steps (4 steps to building the marketing response models):
1. Specification
2. Estimation
3. Testing and validation
4. Application
2.1 Specification
Inputs:
• Marketing decision variables
• Independent variables
Output(s):
• What is the target? Increase sales, build brand awareness, increase market share?
• Dependent variable(s)
Environmental factors:
• Which other factors influence the output(s)?
• Control variables
Express in terms of equation:
• B0 is the contant
Think about subscript -> what is your observation:
• t for time and i for individual
Error term
Think about functional form
• Transformations for non-linear relationships (squared/ln/…)
• In which way are they related? Lineair, U-shape, squared, …
• How do you expect the inputs to relate to the output(s)
Possible functional forms (among others):
1. Linear function
2. Decreasing return (Impact of an increase of one unit in input is very high in the beginning. When
there is already an input in the marketing, the influence of an extra unit has less impact then the
beginning.)
3. Increasing return (Impact on the output is small in the beginning. If there is already some inmput in
the market, an extra unit gives you a lot of impact.)
4. S-shaped. Combination of graph 2 and 3. In the first part there is increasing returns, then there is a
break point where the decreasing return begins.
=> These are the 4 main ones, there are a lot more
