What question did this study set out to answer?

To resolve the trade-offs between advertising and promotion by modeling marketing-mix interactions alongside competitor strategic foresight in dynamic oligopoly markets.

February 1, 2005Marketing Science

Planning Marketing-Mix Strategies in the Presence of Interaction Effects

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To resolve the trade-offs between advertising and promotion by modeling marketing-mix interactions alongside competitor strategic foresight in dynamic oligopoly markets.
Extended the Lanchester differential game model to incorporate activity interaction effects and forward-looking strategic competitor responses.
Formulated an optimization algorithm with strategic foresight and a continuous-discrete estimation method to calibrate dynamic market parameters.
Empirically tested the framework using sales, advertising, and promotional data across five competing brands in the detergent market.
Advertising and promotion exhibited mutual interaction effects, with each activity directly amplifying or attenuating the effectiveness of the other across own and rival brand shares.
Normative spending analysis indicated that large brands underadvertise and overspend on promotions, whereas small brands underadvertise and underpromote.
Comparative statics established that competitive responsiveness among rival brands is asymmetric when reacting to competitors' strategic shifts.

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Implication

Econometric modeling reveals cross-activity interaction effects across five detergent brands, indicating that firms systematically misallocate advertising and promotional spending.

Cite This Study

Naik et al. (2005) studied this question.

synapsesocial.com/papers/69dd2de399c691022d99b4c3 https://doi.org/10.1287/mksc.1040.0083

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Implication

Econometric modeling reveals cross-activity interaction effects across five detergent brands, indicating that firms systematically misallocate advertising and promotional spending.

Planning Marketing-Mix Strategies in the Presence of Interaction Effects

Key Points

Discussion

Implication

Cite This Study

Planning Marketing-Mix Strategies in the Presence of Interaction Effects

Key Points

Discussion

Implication

Cite This Study

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