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Estimating Dynamic Effects of Market Communications Expenditures

Author

Listed:
  • David B. Montgomery

    (Stanford University)

  • Alvin J. Silk

    (Massachusetts Institute of Technology)

Abstract

This paper is concerned with the problem of measuring market response to a "communications mix"--the various means which a firm employs to transmit sales messages to potential buyers. Distributed lag models are applied to time series data for an ethical drug to estimate the short-run, intermediate, and long-run effects on market share of expenditures made for journal advertising, direct mail advertising, and samples and literature. Important differences were found among the communications variables with respect to the magnitude and over-time pattern of effect each had on market share. Significantly, the results indicate that the average historic allocation of resources to alternative communication vehicles has been in inverse relation to measured market response. A variety of econometric checks on the models lends credibility to the results. The managerial implications of the findings are discussed.

Suggested Citation

  • David B. Montgomery & Alvin J. Silk, 1972. "Estimating Dynamic Effects of Market Communications Expenditures," Management Science, INFORMS, vol. 18(10), pages 485-501, June.
    • Handle: RePEc:inm:ormnsc:v:18:y:1972:i:10:p:b485-b501
    DOI: 10.1287/mnsc.18.10.B485
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    Cited by:

    1. Eelco Kappe & Ashley Stadler Blank & Wayne S. DeSarbo, 2014. "A General Multiple Distributed Lag Framework for Estimating the Dynamic Effects of Promotions," Management Science, INFORMS, vol. 60(6), pages 1489-1510, June.
    2. Melvin Woodley, 2021. "Decoupling the individual effects of multiple marketing channels with state space models," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(3), pages 248-255, June.
    3. Vinod Agarwal & Gilbert Yochum, 1998. "Tourism and advertising: Evidence from Virginia beach," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 4(4), pages 384-397, November.
    4. Leister, Amanda M. & Capps, Oral, Jr. & Rosson, C. Parr, III, 2010. "The Economic Effects of New-Product Beef Promotion in Guatemala," Journal of Food Distribution Research, Food Distribution Research Society, vol. 41(2), pages 1-11, July.
    5. Little, John D. C., 1973. "Brandaid II," Working papers 687-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    6. Lesscher, Lisan & Lobschat, Lara & Verhoef, Peter C., 2021. "Do offline and online go hand in hand? Cross-channel and synergy effects of direct mailing and display advertising," International Journal of Research in Marketing, Elsevier, vol. 38(3), pages 678-697.
    7. Ernst R. Berndt & Linda T. Bui & David H. Lucking-Reiley & Glen L. Urban, 1996. "The Roles of Marketing, Product Quality, and Price Competition in the Growth and Composition of the U.S. Antiulcer Drug Industry," NBER Chapters, in: The Economics of New Goods, pages 277-328, National Bureau of Economic Research, Inc.
    8. Nestor Shpak & Ihor Kulyniak & Maryana Gvozd & Yuliya Malynovska & Włodzimierz Sroka, 2020. "Estimation of the Marketing Activity of Banking Structures," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 68(1), pages 229-242.
    9. Kremer, Sara T.M. & Bijmolt, Tammo H.A. & Leeflang, Peter S.H. & Wieringa, Jaap E., 2008. "Generalizations on the effectiveness of pharmaceutical promotional expenditures," International Journal of Research in Marketing, Elsevier, vol. 25(4), pages 234-246.

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