The Persistence of Marketing Effects on Sales

Are marketing efforts able to affect long-term trends in sales or other performance measures? Answering this question is essential for the creation of marketing strategies that deliver a sustainable competitive advantage. This paper introduces persistence modeling to derive long-term marketing effectiveness from time-series observations on sales and marketing expenditures. First, we use unit-root tests to determine whether sales are stable or evolving (trending) over time. If they are evolving, we examine how strong this evolution is (univariate persistence) and to what extent it can be related to marketing activity (multivariate persistence). An empirical example on sales and media spending for a chain of home-improvement stores reveals that some, but not all, advertising has strong trend-setting effects on sales. We argue that traditional modeling approaches would not pick up these effects and, therefore, seriously underestimate the long-term effectiveness of advertising. The paper concludes with an agenda for future empirical research on long-run marketing effectiveness.