Temporal changes in marketing mix effectiveness

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Virginia Tech

This research develops hypotheses to explain temporal changes in the effectiveness of marketing mix variables. Three potential explanations for these changes in market response are explored: (1) changes in market response associated with industry evolution, (2) trends in market response which may be related to changes in consumer knowledge and familiarity with products over time, and (3) changes in market response associated with changes in consumer incomes. In addition, this research investigates (4) changes in the relative effectiveness of marketing mix variables over time. The hypotheses are tested on time series data from five U.S. industries as well as aggregate U.S. consumption data. To estimate temporal changes in market price sensitivity, advertising effectiveness, and distribution effectiveness, a structural time series modeling methodology is used, and numerical optimization procedures are used to perform maximum likelihood estimation. The results show mixed support for the hypothesis that market response is related to the level of industry maturity. Problems with the indicators of industry maturity were identified which may be partly responsible for the mixed results. Consistent with expectations, this study shows that advertising effectiveness does appear to decline over time, while market price sensitivity and distribution effectiveness increase. Consequently, price reduCtions and increases in distribution coverage appear to become relatively more effective than increases in advertising expenditures over time. There appears to be no relationship between marketing mix effectiveness and consumer incomes.