Marnik G. Dekimpe

The Market Valuation of Internet Channel Additions

The emergence of the Internet has pushed many established companies to explore this radically new distribution channel. Like all market discontinuities, the Internet creates opportunities as well as threats—it can be performance-enhancing as readily as it can be performance-destroying. Making use of event-study methodology, the authors assess the net impact of adding an Internet channel on a firms stock market return, a measure of the change in expected future cash flows. The authors find that, on average, Internet channel investments are positive net-present-value investments. The authors then identify firm, introduction strategy, and marketplace characteristics that influence the direction and magnitude of the stock market reaction. The results indicate that powerful firms with a few direct channels are expected to achieve greater gains in financial performance than are less powerful firms with a broader direct channel offering. In terms of order of entry, early followers have a competitive advantage over both innovators and later followers, even when time of entry is controlled for. The authors also find that Internet channel additions that are supported by more publicity are perceived as having a higher performance potential.

Decline and variability in brand loyalty

Abstract In this paper, we examine the over-time behavior of brand loyalty for a large set of brands drawn from 21 consumer packaged goods categories. Using the brand-loyalty operationalization of Colombo and Morrison (1989), the following conclusions are obtained. First, little support is found for the often-heard contention that brand loyalty is gradually declining over time. Second, while the short-run variability around a brands mean loyalty level is not negligible, no evidence is found that this variability has systematically increased over time, and it can be reduced considerably through a simple smoothing procedure. Finally, the brand-loyalty pattern for market-share leaders is found to be more stable than for other brands. The study findings were robust to variation in the time interval used to construct the switching matrices, and to different treatments of multiple purchases.

The increasing power of store brands: Building loyalty and market share

Abstract An important evolution in the retailing industry is the growing success of store brands. Still, their level of penetration varies widely across countries and industries. We provide an operational measure to quantify the power of store brands along two dimensions: the intrinsic loyalty of their customer base, and their conquesting power to attract potential switchers. Based on their position along these two dimensions, we classify store and national brands as ‘Giants’, ‘Misers’, ‘Fighters’ or ‘Artisans’. We use the proposed operationalization to evaluate the absolute and relative strength of Albert Heijn, the leading Dutch store brand, in 19 product categories.

Do Promotions Benefit Manufacturers, Retailers, or Both?

Do price promotions generate additional revenue and for whom? Which brand, category, and market conditions influence promotional benefits and their allocation across manufacturers and retailers? To answer these questions, we conduct a large-scale econometric investigation of the effects of price promotions on manufacturer revenues, retailer revenues, and total profits (margins).A first major finding is that a price promotion typically does not have permanent monetary effects for either party. Second, price promotions have a predominantly positive impact on manufacturer revenues, but their effects on retailer revenues are mixed. Moreover, retailer category margins are typically reduced by price promotions. Even when accounting for cross-category and store-traffic effects, we still find evidence that price promotions are typically not beneficial to the retailer. Third, our results indicate that manufacturer revenue elasticities are higher for promotions of small-share brands, for frequently promoted brands and for national brands in impulse product categories with a low degree of brand proliferation and low private-label shares. Retailer revenue elasticities are higher for brands with frequent and shallow promotions, for impulse products, and in categories with a low degree of brand proliferation. Finally, retailer margin elasticities are higher for promotions of small-share brands and for brands with infrequent and shallow promotions. We discuss the managerial implications of our results for both manufacturers and retailers.

Global Diffusion of Technological Innovations: A Coupled-Hazard Approach

The authors propose a new methodology called the “coupled-hazard approach” to study the global diffusion of technological innovations. Beyond its ability to describe discontinuous diffusion patterns, the method explicitly recognizes the conceptual difference between the timing of a countrys introduction of the new technology (the so-called implementation stage; Rogers 1983) and the timing of the innovations full adoption in the country (the confirmation stage). To illustrate the method, the authors apply it to the global diffusion of digital telecommunications switches across more than 160 countries.

The Effect of Customer Satisfaction on Consumer Spending Growth

Predicting aggregate consumer spending is vitally important to marketing planning, yet traditional economic theory holds that predicting changes in aggregate consumer spending is not possible. Previous attempts to predict consumer spending growth using standard macroeconomic predictor variables have met with little success. The authors show that the lagged change in customer satisfaction, which contributes to future demand, has a significant impact on spending growth. However, this impact is moderated by increases in consumers’ debt service ratio, a key budget constraint that affects consumers’ ability to spend. Using an asymmetric growth model, more than 23% of the variation in the one-quarter-ahead spending growth is explained, which represents a notable improvement over prior specifications.

The role of national culture in advertising's sensitivity to business cycles: an investigation across continents

The authors conduct a systematic investigation into the cyclical sensitivity of advertising expenditures in 37 countries, covering four key media: magazines, newspapers, radio, and television. They show that advertising is considerably more sensitive to business-cycle fluctuations than the economy as a whole. Advertising behaves less cyclically in countries high in long-term orientation and power distance, but it is more cyclical in countries high in uncertainty avoidance. Furthermore, advertising is more sensitive to the business cycle in countries characterized by significant stock market pressure and few foreign-owned multinational corporations. The authors provide initial evidence on the long-term social and managerial losses incurred when companies tie ad spending too tightly to business cycles. Countries in which advertising behaves more cyclically exhibit slower growth of the advertising industry. Moreover, private-label growth is higher in countries characterized by more cyclical advertising spending, implying significant losses for brand manufacturers. Finally, an examination of 26 global companies shows that stock price performance is lower for companies that exhibit stronger procyclical advertising spending patterns.

Time-series models in marketing:: Past, present and future

Time-series methods have been available to explain and forecast the behavior of longitudinal variables for several decades. We first discuss why, at first, these methods received relatively little attention from marketing model builders and users. We then show how a number of obstacles to their more widespread use have recently been attenuated. Finally, we identify four developments that may significantly affect the future use of time-series techniques in marketing: the ever-increasing size of marketing data sets, the rate of change in the market environment, a growing interest in exploring the finance-marketing interface, and the emergence of Internet data sources. q 2000 Elsevier Science B.V. All rights reserved.

Rising from the ashes: How brands and categories can overcome product-harm crises

Product-harm crises are omnipresent in todays marketplace. Such crises can cause major revenue and market-share losses, lead to costly product recalls, and destroy carefully nurtured brand equity. Moreover, some of these effects may spill over to nonaffected competitors in the category when they are perceived to be guilty by association. The extant literature lacks generalizable knowledge on the effectiveness of different marketing adjustments that managers often consider to mitigate the consequences of such events. To fill this gap, the authors use large household-scanner panels to analyze 60 fast-moving consumer good product crises that occurred in the United Kingdom and the Netherlands and resulted in the full recall of an entire variety. The authors assess the effects of postcrisis advertising and price adjustments on the change in consumers’ brand share and category purchases. In addition, they consider the extent to which the effects are moderated by two key crisis characteristics: the extent of negative publicity surrounding the event and whether the affected brand had to publicly acknowledge blame. Using the empirical findings, the authors provide context-specific managerial recommendations on how to overcome a product-harm crisis.

“Globalization”: Modeling Technology Adoption Timing Across Countries☆

We study global adoption processes where the units of observation are countries which sequentially adopt a particular technology. Our goal is to provide a better understanding of how exogenous and endogenous country characteristics affect this diffusion process. We develop a general model of global adoption processes which allows researchers to test extent theories of cross-country adoption, and illustrate the approach using data from the cellular telephone industry for 184 countries.