nep-mkt New Economics Papers
on Marketing
Issue of 2010‒03‒13
fifteen papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Advertising and price effectiveness over the business cycle. By Gijsenberg, Maarten; van Heerde, Harald J.; Dekimpe, Marnik; Steenkamp, Jan-Benedict E.M.
  2. Understanding the timing and magnitude of advertising spending patterns. By Gijsenberg, Maarten; van Heerde, Harald J.; Dekimpe, Marnik; Steenkamp, Jan-Benedict E.M.; Nijs, Vincent R.
  3. Marketing and the Logic of Service: Value Facilitation, Value Creation and Co-creation, and Their Marketing Implications By Grönroos, Christian; Ravald, Annika
  4. The Hybrid Consumer: Exploring the Drivers of a New Consumer Behaviour Type By Christian, Grönroos; Leppänen, Hanna
  5. Rethinking Service Companies’ Business Logic: Do We Need a Customer-Dominant Logic as a Guideline? By Heinonen, Kristina; Strandvik, Tore; Mickelsson, Karl-Jacob; Edvardsson, Bo; Sundström, Erik; Andersson, Per
  6. Do consumers make too much effort to save on cheap items and too little to save on expensive items? experimental results and implications for business strategy By Azar, Ofer H.
  7. The Optimal Marketing Mix of Posted Prices, Discounts and Bargaining By David Gill; John Thanassoulis
  8. Towards Service Logic: The Unique Contribution of Value Co-Creation By Grönroos, Christian
  9. Activityscape Mapping: Consumer Activity Systems as Service Context By Mickelsson, Jacob
  10. Paying for ATM usage : good for consumers, bad for banks ?. By Donze, Jocelyn; Dubec, Isabelle
  11. Timing is money. In search of the role of timing in marketing decisions and effectiveness.. By Gijsenberg, Maarten
  12. Discriminatory fees, coordination and investment in shared ATM networks By Stijn Ferrari
  13. Unique Equilibrium in Two-Part Tariff Competition between Two-Sided Platforms By Markus Reisinger
  14. Prices and Cigarette Demand: Evidence from Youth Tobacco Use in Developing Countries By Deliana Kostova; Hana Ross; Evan Blecher; Sara Markowitz
  15. Conceptual Foundations of the Balanced Scorecard By Robert S. Kaplan

  1. By: Gijsenberg, Maarten; van Heerde, Harald J.; Dekimpe, Marnik; Steenkamp, Jan-Benedict E.M.
    Abstract: In this study, the authors conduct a systematic investigation on the evolution in the effectiveness of two important marketing mix instruments, advertising and price, over the business cycle. Analyses are based on 163 branded products in 37 mature CPG categories in the UK, and this for a period of 15 years. The data are a combination of (i) monthly national sales data, (ii) monthly advertising data, (iii) data on the general economic conditions, and (iv) consumer survey data. Consumers are shown to be more price sensitive during contractions. In addition, spending patterns will be less consistent, implying smaller brand loyalty. Advertising elasticities, however, do not seem to be affected by economic downturns. Product involvement was shown to be an influential moderator of the final effect of advertising, price and carry-over effects on sales. Finally, although short run effectiveness of price differs between expansions and contractions, the long run effectiveness of both advertising and price is not altered by differences in the general economic conditions.
    Keywords: advertising; price; effectiveness; business cycle; time-series econometrics; Bayesian inference;
    Date: 2009–03
  2. By: Gijsenberg, Maarten; van Heerde, Harald J.; Dekimpe, Marnik; Steenkamp, Jan-Benedict E.M.; Nijs, Vincent R.
    Abstract: Notwithstanding the fact that advertising is one of the most used marketing tools, little is known about what is driving (i) the timing and (ii) the magnitude of advertising actions. Building on normative theory, the authors develop a parsimonious model that captures this dual investment process. They explain advertising spending patterns as observed in the market, and investigate the impact of company, competitive, and category-related factors on these decisions, thereby introducing the novel concept of Ad-sensor. Analyses are based on a unique combination of (i) weekly advertising data on 748 CPG brands in 129 product categories in the UK, (ii) household panel purchase data, and (iii) data on new product introductions. The analyzed brands include both large and small brands, both frequent and infrequent advertisers, thus providing a more complete and correct overview of the market. The results show that advertising spending patterns can be explained as real-life applications of the normative literature, in which advertising and advertising goodwill management are embedded in dynamic (s,S) inventory systems. Adstock and Ad-sensor show a positive effect on both timing and magnitude decision. Competitive reasoning is found to have little to no effect on advertising decisions, whereas category-related factors do show an impact. The extent to which campaigning strategies are more or less the outcome of advertising goodwill management systems, however, varies across brands as a function of their relative size and advertising frequency.
    Keywords: advertising; timing; competition; Tobit-II; Bayesian inference;
    Date: 2009–04
  3. By: Grönroos, Christian (Hanken School of Economics); Ravald, Annika (Hanken School of Economics)
    Abstract: The discussion of a service-dominant logic has made the findings of decades of service marketing research a topic of interest for marketing at large. Some fundamental aspects of the logic such as value creation and its marketing implications are more complex than they have been treated as so far and need to be further developed to serve marketing theory and practice well. Following the analysis in the present article it is argued that although customers are co-producers in service processes, according to the value-in-use notion adopted in the contemporary marketing and management literature they are fundamentally the creators of value for themselves. Furthermore, it is concluded that although by providing goods and services as input resources into customers’ consumption and value-generating processes firms are fundamentally value facilitators, interactions with customers that exist or can be created enable firms to engage themselves with their customers’ processes and thereby they become co-creators of value with their customers. As marketing implications it is observed that 1) the goal of marketing is to support customers’ value creation, 2) following a service logic and due to the existence of interactions where the firm’s and the customer’s processes merge into an integrated joint value creation process, the firm is not restricted to making value propositions only, but can directly and actively influence the customer’s value fulfilment as well and extend its marketing process to include activities during customer-firm interactions, and 3) although all goods and services are consumed as service, customers’ purchasing decisions can be expected to be dependant of whether they have the skills and interest to use a resource, such as a good, as service or want to buy extended market offerings including process-related elements. Finally, the analysis concludes with five service logic theses.
    Keywords: Service logic; service-dominant logic; service marketing; marketing theory
    Date: 2010–03–02
  4. By: Christian, Grönroos (Hanken School of Economics); Leppänen, Hanna (Hanken School of Economics)
    Abstract: A dramatically different consumption pattern seems to be emerging among a vast group of consumers. This may mean that conventional consumer stereotypes and segmentation theory are becoming outdated. The so called hybrid consumers seem to increasingly opt for both premium and budget alternatives in various product and service categories while mid-priced alternatives are losing share in their consumption basket. Although this type of polarisation, or dispersion, is already recognized as an important change, hybrid behaviour is still largely under-researched. The present study aims to analyze the possible drivers of hybrid consumption and by identifying typical categories and situations of trading up versus trading down derive tentative characteristics of hybrid consumption for further research on the topic. A tentative pattern of hybrid consumption was identified, which relates trading up to high-involvement, discretional spending and trading down to low-involvement necessities. However, it was also found that hybrid consumption transcends product category boundaries and may thus be less straightforward than previously perhaps assumed. In addition, a purchase pattern continuum was developed, accounting for various degrees of hybrid consumption.
    Keywords: hybrid consumer /-behaviour; consumption patterns /-trends; polarisation; omnivorousness
    Date: 2010–03–02
  5. By: Heinonen, Kristina (Hanken School of Economics); Strandvik, Tore (Hanken School of Economics); Mickelsson, Karl-Jacob (Hanken School of Economics); Edvardsson, Bo (Karlstad University); Sundström, Erik (Karlstad University); Andersson, Per (Stockholm School of Economics)
    Abstract: Purpose –This paper explores and expands the roles of customers and companies in creating value by introducing a new a customer-based approach to service. The customer’s logic is examined as being the foundation of a customer-based marketing and business logic. Design/methodology/approach – The authors argue that both goods-dominant logics and service-dominant logics are provider-dominant. Contrasting the customer-dominant logic with provider-dominant logics, the paper examines the creation of service value from the perspectives of value-in-use, the customer’s own context, and the customer’s experience of service. Findings –Moving from a provider-dominant logic to a customer-dominant logic uncovered five major challenges to service marketers: Company involvement, company control in co-creation, visibility of value creation, locus of customer experience, and character of customer experience. Research limitations/implications – The paper is exploratory. It presents and discusses a conceptual model and suggests implications for research and practice. Practical implications –Awareness of the mechanisms of customer logic will provide businesses with new perspectives on the role of the company in their customer’s lives. We propose that understanding the customer’s logic should represent the starting-point for the marketer’s business logic. Originality/value – The paper increases the understanding of how the customer’s logic underpins the customer-dominant business logic. By exploring consequences of applying a customer-dominant logic, we suggest further directions for theoretical and empirical research.
    Keywords: service; customer-dominant logic; co-creation; value-in-use; customer experience
    Date: 2010–03–02
  6. By: Azar, Ofer H.
    Abstract: The article presents an experiment that illustrates a behavior that I denote “relative thinking.” Subjects in the experiment revealed the minimal price difference for which they were willing to spend 20 minutes and go to a cheaper store. Five different goods and nine different prices were used in a between-subjects design. Subjects showed striking positive correlation between the good’s price and their valuation of their time as it was reflected in their decisions. The experiment suggests that subjects think about both the relative and the absolute price differences, even though according to economic theory they should only consider the absolute price difference. Quantifying the effect suggests that consumers’ valuation of their time is approximately proportional to the square root of the price of the good they want to purchase. Studying economics courses seems to mitigate relative thinking. Several alternative explanations for the observed behavior are suggested and discussed, but the conclusion is that only the relative thinking explanation can account for the experimental results. Finally, several implications of relative thinking for business strategy are discussed.
    Keywords: Relative thinking; Consumer behavior; Behavioral economics
    JEL: M30 D10 M10 C91
    Date: 2009
  7. By: David Gill; John Thanassoulis
    Abstract: In many markets firms set posted prices which are potentially negotiable. We analyze the optimal marketing mix of pricing and bargaining when price takers buy at posted prices but bargainers attempt to negotiate discounts. The optimal bargaining strategy involves the firms offering bargainers randomly-sized discounts. Competing firms keep posted prices high to weaken the bargainers’ outside option, thus forgoing the chance to increase profits from price takers by undercutting their rival. A range of posted price equilibria are possible, and the higher price in the range inrceases when the proportion of bargainers goes up or the bargainers become less skilled. We consider how firms and competition authorities might encourage more consumers to bargain and determine the conditions under which each would choose to do so. Finally, we study the firms’ strategic decision about how much bargaining discretion sales staff should be allowed. Both firms allowing full bargaining flexibility is always an equilibrium - but not always the most profitable one. If there are enough bargainers, both firms committing to only matching the rival’s posted price is also an equilibrium: price matching moderates competition, thus raising profits.
    Keywords: Posted prices, List prices, Bargaining, Negotiation, Haggling, Discounts, Outside option, Price takers, Competition policy, Price matching
    JEL: C78 D43 L13
    Date: 2010
  8. By: Grönroos, Christian (Hanken School of Economics)
    Abstract: The underpinning logic of value co-creation in service logic is analysed. It is observed that three of the ten foundational premises of the so-called service-dominant logic are problematic and do not support an understanding of value-co-creation and creation that is meaningful for theoretical development and decision making in business and marketing practice. Without a thorough understanding of the interaction concept, the locus and nature of value co-creation cannot be identified. Based on the analysis in the present article it is observed that a unique contribution of a service perspective on business (service logic) is not that customers always are co-creators of value, but that under certain circumstances the service provider gets opportunities to co-create value together with its customers. Finally, the three problematic premises are reformulated accordingly.
    Keywords: value co-creation; value creation; value facilitation; service logic; service dominant logic
    Date: 2010–03–02
  9. By: Mickelsson, Jacob (Hanken School of Economics)
    Abstract: Activity systems are the cognitively linked groups of activities that consumers carry out as a part of their daily life. The aim of this paper is to investigate how consumers experience value through their activities, and how services fit into the context of activity systems. A new technique for illustrating consumers’ activity systems is introduced. The technique consists of identifying a consumer’s activities through an interview, then quantitatively measuring how the consumer evaluates the identified activities on three dimensions: Experienced benefits, sacrifices and frequency. This information is used to create a graphical representation of the consumer’s activity system, an “activityscape map”. Activity systems work as infrastructure for the individual consumer’s value experience. The paper contributes to value and service literature, where there currently are no clearly described standardized techniques for visually mapping out individual consumer activity. Existing approaches are service- or relationship focused, and are mostly used to identify activities, not to understand them. The activityscape representation provides an overview of consumers’ perceptions of their activity patterns and the position of one or several services in this pattern. Comparing different consumers’ activityscapes, it shows the differences between consumers' activity structures, and provides insight into how services are used to create value within them. The paper is conceptual; an empirical illustration is used to indicate the potential in further empirical studies. The technique can be used by businesses to understand contexts for service use, which may uncover potential for business reconfiguration and customer segmentation.
    Keywords: Service; value; activityscape; consumer activity systems; service-in-context; value-in-context
    Date: 2010–03–02
  10. By: Donze, Jocelyn; Dubec, Isabelle
    Date: 2009
  11. By: Gijsenberg, Maarten
    Abstract: Bedrijven ondervinden steeds grotere druk om hun marketinguitgaven te verantwoorden. Deze druk zal bovendien enkel maar toenemen tijdens economische crisissen, aangezien elke dollar dan dubbel telt. Het meten, begrijpen en verbeteren van de effectiviteit van marketinguitgaven is dan ook een van zeer groot belang voor de meeste senior marketing managers. In deze dissertatie focussen we op een van de cruciale determinanten van de effectiviteit van marketinguitgaven: hun timing. We richten ons hierbij op twee duidelijk verschillende maar tegelijk nauw verwante niveaus: op het microniveau van beslissingen voor individuele campagnes, en op het macroniveau van de effectiviteitsevolutie over economische cycli. De effectiviteit van individuele reclamecampagnes wordt voor een groot stuk bepaald door hun timing en grootte. Wij stellen dat geobserveerde beslissingen van bedrijven over timing en grootte van individuele campagnes gezien kunnen worden als het resultaat van actieve reclame goodwill management systemen. Reclame wordt gepland in campagnes, dit teneinde de resulterende goodwill tussen een bepaald minimum en maximum te houden. In deze dissertatie introduceren we het nieuw Ad-sensor concept dat, tezamen met het welbekende Adstock, op een overtuigende manier deze campagnedynamiek weet te vatten. Dergelijke interne goodwill management systemen blijken bovendien de belangrijkste factor in de uiteindelijke beslissingen te zijn. Acties van concurrenten, daarentegen, blijken amper of geen invloed te hebben op geobserveerde reclamebeslissingen. Het uiteindelijke resultaat van dergelijke campagnes zal echter afhangen van de algemene economische situatie op dat moment. We onderzoeken daarom hoe de effectiviteit van twee belangrijke marketing mix instrumenten, nl. reclame en prijs, evolueert over de economische cycli. Daarnaast onderzoeken we ook hoe geobserveerde klantentrouw beïnvloed wordt door de algemene economische situatie. Hierbij kijken we bovendien zowel naar korte- als lange-termijn effecten. Onze resultaten geven aan dat, hoewel korte-termijn Dorfman-Steiner allocatieratios kunnen wijzigen, de lange-termijn ratios constant blijven. Bedrijven doen er bijgevolg goed aan hun budgetallocatie op een permanente basis af te stemmen op deze lange-termijn ratios, in plaats van de allocatie voortdurend aan te passen aan korte-termijn afwijkingen. Door hun marketingbudgetten niet te reduceren, beschikken ze bovendien over een krachtig wapen tegen de opmars van huismerken tijdens economische minder gunstige tijden.
    Date: 2009–07–06
  12. By: Stijn Ferrari (National Bank of Belgium, Financial Stability Department; Catholic University of Leuven)
    Abstract: This paper empirically examines the effects of discriminatory fees on ATM investment and welfare, and considers the role of coordination in ATM investment between banks. Our main findings are that foreign fees tend to reduce ATM availability and (consumer) welfare, whereas surcharges positively affect ATM availability and the different welfare components when the consumers' price elasticity is not too large. Second, an organization of the ATM market that contains some degree of coordination between the banks may be desirable from a welfare perspective. Finally, ATM availability is always higher when a social planner decides on discriminatory fees and ATM investment to maximize total welfare. This implies that there is underinvestment in ATMs, even in the presence of discriminatory fees
    Keywords: investment, coordination, ATMs, network industries, empirical entry models, spatial discrete choice demand models
    JEL: G21 L10 L50 L89
    Date: 2010–01
  13. By: Markus Reisinger (Department of Economics, University of Munich)
    Abstract: Two-sided market models in which platforms compete via two-part tariffs, i.e. a subscription and a per-transaction fee, are often plagued by a continuum of equilibria. This paper augments existing models by allowing for heterogeneous trading behavior of agents on both sides. We show that this simple method yields a unique equilibrium even in the limit as the heterogeneity vanishes. In case of competitive bottlenecks we find that in this equilibrium platforms benefit from the possibility to price discriminate if per-transaction costs are relatively large. This is the case because two-part tariffs allow platforms to better distribute these costs among the two sides. Under two-sided single-homing price discrimination hurts platforms if per-transaction fees can be negative.
    Keywords: Two-Sided Markets, Per-Transaction Fee, Subscription Fee, Two-Part Tariffs, Unique Equilibrium
    JEL: D43 L13
    Date: 2010–02
  14. By: Deliana Kostova; Hana Ross; Evan Blecher; Sara Markowitz
    Abstract: This paper estimates the impact of cigarette prices on youth smoking in lower-income countries using data from the Global Youth Tobacco Survey (GYTS). Country-level heterogeneity is addressed with fixed effects and by directly controlling for confounding environmental factors such as local anti-smoking sentiment, cigarette advertising, anti-smoking media messages, and compliance with youth access restrictions. We find that cigarette price is an important determinant of both smoking participation and conditional demand. The estimated price elasticity of participation is -0.63. The likelihood of participation decreases with anti-smoking sentiment and increases with exposure to cigarette advertising. The estimated price elasticity of conditional cigarette demand is approximately -1.2. Neither anti-smoking sentiment, cigarette advertising, nor access restrictions have an impact on the intensity of smoking among current smokers, but exposure to anti-smoking media may reduce the number of cigarettes smoked.
    JEL: I1 O1
    Date: 2010–02
  15. By: Robert S. Kaplan (Harvard Business School, Accounting and Management Unit)
    Abstract: David Norton and I introduced the Balanced Scorecard in a 1992 Harvard Business Review article (Kaplan & Norton, 1992). The article was based on a multi-company research project to study performance measurement in companies whose intangible assets played a central role in value creation (Nolan Norton Institute, 1991). Norton and I believed that if companies were to improve the management of their intangible assets, they had to integrate the measurement of intangible assets into their management systems. After publication of the 1992 HBR article, several companies quickly adopted the Balanced Scorecard giving us deeper and broader insights into its power and potential. During the next 15 years, as it was adopted by thousands of private, public, and nonprofit enterprises around the world, we extended and broadened the concept into a management tool for describing, communicating and implementing strategy. This paper describes the roots and motivation for the original Balanced Scorecard article as well as the subsequent innovations that connected it to a larger management literature.
    Date: 2010–03

This nep-mkt issue is ©2010 by Joao Carlos Correia Leitao. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.