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Retail managers should really know this

Date:06 March 2017
Author:Maarten Gijsenberg
Maarten Gijsenberg, Associate Professor of Marketing
Maarten Gijsenberg, Associate Professor of Marketing

I have a message for retail managers: the effectiveness of advertising and pricing decisions are not the same throughout the year.

This is made clear in the results of my study of the weekly sales, advertising and pricing data of 252 brands in the United Kingdom between 2002 and 2005.

This was the first study to systematically investigate how cycles during the year can influence advertising and pricing effectiveness, while observing both. Past studies have often regarded such cycles and their impact on brands’ sales as a mere nuisance in the analysis of brands’ marketing mix effectiveness, limiting them to coarse seasonal control variables.

In fact, the data shows a clear effect. Both advertising effectiveness and observed advertising are stronger at demand peaks. Perhaps surprisingly, consumer reactions to price decreases tend to be weaker at demand peaks, though they are more responsive to advertising at that point.

Other interesting findings were that brands generally increase advertising at peaks, and while low-price brands tend to increase prices at peaks, high-price brands tend to lower them.

Firms are under constant and ever-increasing pressure to both prove and improve the effectiveness of their marketing investments in general, and thus, more specifically, of their advertising and pricing actions.

I would argue that it is critical for marketers to acknowledge the existence of these cycles within the year, and understand how the effectiveness of advertising and pricing can be affected.

The findings of this study should alert managers to the fact that this effectiveness is not constant throughout the year. They need to take this into account when deciding on their advertising and promotional agendas.

For more details, please see the full study here.

Gijsenberg, M. (2017). Riding the Waves: Revealing the Impact of Intra-Year Category Demand Cycles on Advertising and Pricing Effectiveness. Journal of Marketing Research. DOI: 10.1509/jmr.14.0576

Maarten Gijsenberg, Associate Professor of Marketing.