Do firms fully capitalize on the financial strength of their customer-based brand equity (CBBE)? If not, how large is the gap to a benchmark condition where CBBE is financially fully leveraged? Which market strategies, if any, should the firm emphasize to close the gap? This research addresses these questions. The authors introduce a framework and methodology that enables firms to identify and measure their “brand capabilities gap,” which captures the firm’s potential for leveraging CBBE into firm value when the most effective and efficient brand leverage strategy is in place, and, if necessary, take corrective action to realize their brand leverage potential. The authors further examine three market strategy moderators that firms can steer via their marketing programs and tactics to close the brand capabilities gap. The application of the framework and methodology to a wide-ranging sample of firms from 2005-2013 reveals that, on average, firms only realize 35% of their financial brand leverage potential. This translates into an average brand capabilities gap worth $2.1 bn per brand, which represents 4.3% of firm value. These findings have important implications for strategic brand analysis and planning and can help firms design a more effective financial brand leverage strategy.

Companies are increasingly held accountable for their corporate social irresponsibility (CSI). However, the extent to which a CSI event causes damage to the firm largely depends on the coverage of this event in high-reach news media. Using the theory of news value developed in communications research, the authors explain the amount of media coverage by introducing a set of variables related to the event, the involved brand, and media outlet. The authors analyze a sample of 1,054 CSI events that were reported in 77 leading media outlets in five countries in the period 2008–2014. Estimation results reveal a significant number of drivers: for example, the number of media covering the story may be 39% higher for salient and strong brands. 80% more media report the event if a foreign brand is involved in a domestic CSI event. When a brand advertises heavily or exclusively in a news medium, this reduces the likelihood of the news medium to cover negative stories about the brand. The average financial loss at the U.S. stock market due to a CSI event amounts to US$ 321 million. However, the market only reacts to the event if 4 or more U.S. high-reach media outlets report on the event. 

You can download the paper here.

The launch of a new product is one of the most critical activities that product and brand managers are faced with. It requires a substantial communications budget to introduce the new product to the market. As the number of media channels proliferates, however, managers are increasingly held accountable to demonstrate the efficient use of resources.  

This article introduces a new decision support tool to optimize advertising campaigns for new product launches based on learnings from an ex post analysis of prior campaigns. The tool builds on a distinct data collection approach combined with econometric modeling to produce advertising elasticities, which are the key information in the media mix optimization.  

The approach was implemented at Mercedes-Benz and applied to four major new car launches in Germany in 2012 and 2013. It revealed estimated savings of 15-30% or EUR 2 million per campaign, respectively, from more efficient use of resources.

Marketing and finance executives follow different objectives and focus on different stakeholder groups. Marketers want to create sales impact. Finance executives are concerned about the financial health of the firm. As a result, both worlds tend to be rather disconnected in their daily business. We argue that this does not reflect the dynamics of the firm where important marketing and financial metrics in fact interact. As long as marketing and finance officers do not fully appreciate the interplay of their key metrics, their decisions are likely to be suboptimal.

This article proposes a simultaneous equation model that reflects the interaction of marketing and finance-domain variables in the value creation process. We focus on brand-building activities and the attraction of capital as major tasks of marketing and finance officers. Our model shows how advertising and other investments increase customer-based brand equity (CBBE) that in turn impacts financial leverage and credit spread and ultimately elevates the level of financial resources.

Based on a broad sample of 155 firms covering various B2C industries, we test for the empirical relevance of our model. We also assess the practical significance of our results by transforming them into elasticities. Our results suggest that marketing and finance executives need to consider the dynamic interaction of their decision and performance variables to fully evaluate the effects of their decisions on the firm's financial health.

The interest in the value relevance of marketing investments has given rise to numerous studies on the marketing-finance interface. This study integrates extant research findings and establishes empirical generalizations on marketing's impact on firm value. Specifically, the authors conduct a meta-analysis of prior econometric elasticity estimates of the stock-market impact of marketing actions and marketing assets. Analyses based on 488 elasticities drawn from 83 studies reveal a mean elasticity of .04 for advertising-expenditure variables and of .54 for marketing-asset variables. Among marketing assets, customer-related assets show a higher mean elasticity of .72 compared to .33 for brand-related assets. Further analyses show that advertising elasticities are lower in more concentrated industries and marketing-asset elasticities are higher during recession times. Researchers should also be aware that characteristics of the research design, e.g., the type of firmvalue metric used, omission of control variables, or not accounting for endogeneity, may affect the estimation results.

Although volatile marketing spending, as opposed to even-level spending, may improve a brand’s financial performance, it can also increase the volatility of performance, which is not a desirable outcome. This article analyzes how revenue and cash-flow volatility are influenced by own and competitive marketing spending volatility, by the level of marketing spending, by the responsiveness to own marketing spending, and by competitive response. From market response theory, we derive propositions about the influence of these variables on revenue and cash-flow volatility. In addition, we extend the Dorfman–Steiner theorem to derive the optimal level and volatility of expenditures if volatility effects are taken into account. Based on a large sample of 99 pharmaceutical brands in four clinical categories and four European countries, we test for the empirical relevance of the propositions and assess the magnitude of the different sources of marketing-induced performance volatility. We find broad support for the predicted volatility effects. Volatility elasticities are significant and may be as large as 1.10 for cash-flow variance with respect to marketing responsiveness. The findings imply that common volatility-increasing marketing practices such as price promotions or volatile advertising plans may be effective at the top line, but they could turn out to be ineffective after all costs are taken into account. Optimal marketing volatility needs to trade off sales effectiveness and extra costs resulting from marketing volatility.

This study analyzes the effect of brand associations and marketing-mix instrument perceptions on brand strength for B2B firms. Although B2B brands may contribute substantially to firm profit, only little research has been directed at them. We close this research gap by analyzing a unique data set that spans across three countries and seven industries. We find that the brand-associations ‘sustainability and corporate governance’ as well as ‘innovation and expertise’ drive brand strength in B2B markets across all countries and industries. For marketing-mix instruments, product and distribution perceptions shape brand strength. However, the effects of marketing-mix instrument perceptions vary by industry and country.

Current complex dynamic markets are characterized by numerous brands, each with multiple products and price points, and differentiated on a variety of product attributes plus a large number of new product introductions. This study seeks to analyze dynamic pricing paths in a highly complex branded market, consisting of 663 products under 79 brand names of digital cameras. The authors develop a method to classify dynamic pricing strategies and analyze the choice and correlates of observed pricing paths in the introduction and early growth phase of this market. The authors find that, despite numerous recommendations in the literature for skimming or penetration pricing, market pricing dominates in practice. In particular, the authors find five patterns: skimming (20% frequency), penetration (20% frequency), and three variants of market-pricing patterns (60% frequency), where new products are launched at market-prices. Skimming pricing launches the new product 16% above market price and subsequently increases the price relative to the market price. Penetration pricing launches the new product 18% below the market price and subsequently lowers the price relative to the market price. Firms exhibit a mix of these pricing paths across their portfolio. The specific pricing paths correlate with market, firm, and brand characteristics such as competitive intensity, market pioneering, brand reputation, and experience effects. The authors discuss managerial implications.

High financial risks in production and marketing, the hedonic nature of products, and the global cultural relevance of movies have encouraged a substantial number of researchers to analyze the success drivers of movies. This research provides empirical generalizations in managing the supply and demand of motion pictures. Prior empirical research either ignored the endogeneity of box office and screen allocation or was based on selective samples, ignoring the large amount of smaller movies released to the market. Using two large and unique samples of all movies released in two major movie markets, the US (2000-2010; n=2,098) and Germany (2002-2010; n=1,360), we extend prior research and present empirical generalizations and new fields of research.

Recent marketing studies suggest that non-financial metrics, such as customer satisfaction and brand value, help explain the variation in the cost of equity and the cost of debt. These studies typically focus on only one non-financial metric and one component of capital cost. In this study, we broaden the understanding of the relevance of non-financial metrics to the cost of capital. We investigate the joint role of customer satisfaction, brand value, and corporate reputation for stock market beta and credit ratings, which reflect variation in equity and debt risk premiums across firms. In addition to the joint direct influence of these metrics on capital cost, we also study their interaction effects. We develop a conceptual model to explain the effects on capital costs and test the resulting hypotheses in a broad sample of 344 firms from diverse industries using data from the 1991–2006 period.

Our results suggest that higher satisfaction ratings reduce both the cost of equity and cost of debt, whereas brand value and corporate reputation only show a negative direct association with the cost of debt. In addition, both measures moderate the effect of satisfaction on the cost of debt. Brand value attenuates the influence of satisfaction, whereas corporate reputation amplifies this effect.

Although Europe, the Americas, and Japan still account for more than three-fourths of the market for luxury goods, the consumption of luxury goods is getting more and more a worldwide phenomenon. The rise of emerging countries further underpins the relevance of culture for managerial decisions including the pricing of goods. Prices for regular goods usually correspond to a product’s functional or tangible value. They work as a signal for quality and reduce consumers’ purchase risk. With high quality as a necessity for the perception as a luxury good, prices for luxury brands are primarily symbolic. High prices inhibit emulation and provide luxuries an exclusive image. They further work as a signal for personal wealth or the social rank consumers have or wish to have. While exclusivity corresponds mostly to consumers’ intrinsic needs (e. g., desire for uniqueness), the advertisement of personal wealth and social rank is rather tied to social values and consumers’ extrinsic needs (e. g., prestige and status). Both have value to the consumer: While feelings of exclusivity strengthen self-identity, status and prestige provide self-esteem.

Consumers’ needs and symbolic meanings are culturally bounded. Consequently, the ultimate value consumers derive from luxury fashion brands depends on the way consumers perceive their selves and on how well these brands fit their intrinsic and extrinsic needs. While previous research stresses cultural differences in purchase motives for luxury goods, this study addresses the role of culture for pricing luxury fashion brands.

This paper develops a conceptual framework that links consumers’ intrinsic and extrinsic needs to distinct cultural values. Following previous research, the authors find the pursuit of internal goals to be more important in individualistic countries. The display of personal success seems to be more relevant in masculine countries 2 and the usage of status symbols to prevail more in high power distant countries.

As luxuries’ symbolic value is grounded in their expensiveness, the authors hence suggest higher prices in countries that are more individualistic, masculine, and power distant. Hypotheses are tested by a large sample that covers retail net prices for more than 2,400 luxury fashion items from 15 product categories in five countries (France, Great Britain, Germany, Hong Kong, USA). Controlling for several product characteristics and country-specific effects, the authors find masculine values to have the biggest impact on luxury prices, followed by power distance and individualism. The low influence of individualistic values is explained by the fact that luxury fashion brands offer rather social gains (e. g., prestige and status) than individual gains (e. g. desire for uniqueness). Consequently, the satisfaction of intrinsic needs does not necessarily depend on the purchase of luxury brands.

As managerial application the authors recommend that practitioners should take cultural values into their considerations when pricing luxury fashion brands. Moreover, they suggest that existing pricing strategies should be reviewed based on the results of this study. The authors conclude with the limitations of their study and an avenue for further research. 

[Winner of the 2009-2010 ISMS-MSI Practice Prize competition]

Previous research on marketing budget decisions has shown that profit improvement from better allocation across products or regions is much higher than from improving the overall budget. However, despite its high managerial relevance, contributions by marketing scholars are rare. In this paper, we introduce an innovative and feasible solution to the dynamic marketing budget allocation problem for multiproduct, multicountry firms. Specifically, our decision support model allows determining near-optimal marketing budgets at the country-product-marketing–activity level in an Excel-supported environment each year. The model accounts for marketing dynamics and a product’s growth potential as well as for trade-offs with respect to marketing effectiveness and profit contribution. The model has been successfully implemented at Bayer, one the world’s largest pharmaceutical and chemical firms. The profit improvement potential is more than 50% and worth nearly € 500 million in incremental discounted cash flows.

In this paper, we introduce the customer-insight based approach that Deutsche Post DHL adopted to improve its global express delivery business. DHL has used the operations research based brand assessment tool in more than 20 large countries on four continents since 2004. The tool supports local brand managers in allocating marketing resources to activities that grow the global brand in their country market. Its application led to an estimated increase in brand value of USD 1.32 billion over five years. This corresponds to a return on investment of 38 percent and an internal rate of return of 24 percent. The tool's implementation also had a major impact on DHL's strategy and organization.

[Finalist for the VHB Best Paper Award 2010]

The authors analyze primary demand effects of marketing efforts directed at the physician (detailing and professional journal advertising) versus marketing efforts directed at the patient (direct-to-consumer advertising). The analysis covers 86 categories, or approximately 85% of the U.S. pharmaceutical market, during the 2001–2005 period. Primary demand effects are rather small, in contrast with the estimated sales effects for individual brands. By using a new brand-level method to estimate primary demand effects with aggregate data, the authors show that the small effects are due to intense competitive interactions during the observation period but not necessarily to low primary demand responsiveness. In contrast with previous studies, the authors also find that detailing is more effective in driving primary demand than direct-to-consumer advertising. A category sales model cannot provide such insights. In addition, a category sales model likely produces biased predictions about period-by-period changes in primary demand. The suggested brand-level method does not suffer from these limitations.

[Among Top 5 Downloads in 2011]

Peak sales are an important metric in the pharmaceutical industry. Specifically, managers are focused on the height-of-peak-sales and the time required achieving peak sales. We analyze how order of entry and quality affect the level of peak sales and the time-to-peak-sales of pharmaceutical brands. We develop a growth model that includes these two variables as well as control variables for own and competitive marketing activities. We find that early entrants achieve peak sales later, and they have higher peak-sales levels. High-quality brands achieve peak sales earlier, and their peak-sales levels are higher. In addition, quality has a moderating effect on the order of entry effect on time-to-peak-sales. Our results indicate that late entrants have longer expected time-to-peak-sales when they introduce a brand with high quality.

Winner of the VHB Best Paper Award 2011, finalist for the Robert D. Buzzell MSI Best Paper Award 2011]

Winner of the VHB Best Paper Award 2011, finalist for the Robert D. Buzzell MSI Best Paper Award 2011]

[Winner of the VHB Best Paper Award 2011, finalist for the Robert D. Buzzell MSI Best Paper Award 2011]

This article focuses on the measurement of the overall importance of brands for consumer decision making—that is, brand relevance in category, or BRiC—across multiple categories and countries. Although brand equity measures for specific brands have attracted a large body of literature, the questions of how important brands are within an entire product category and the extent to which BRiC differs across categories and countries have been neglected. The authors introduce the concept of BRiC (a category-level measure, not a brand-level measure). They develop a conceptual framework to measure BRiC and the drivers of BRiC, test the framework empirically with a sample of more than 5700 consumers, and show how the construct varies across 20 product categories and five countries (France, Japan, Spain, the United Kingdom, and the United States). The results suggest a high validity of the proposed BRiC measure and show substantial differences between categories and countries. A replication study two-and-a-half years later confirms the psychometric properties of the suggested scale and shows remarkable stability of the findings. The findings have important implications for the management of brand investments.

[Winner of the Association for Health Care Research Best PhD Student Paper Award]

This study describes a cross-sectional and time series analysis of sales data over one decade in four major segments of the market for cardiovascular drugs. We estimate over 200 product life cycles (PLC) using a very flexible mathematical model to account for a variety of PLC shapes. Life cycles are then clustered on the basis of estimated regression coefficients. As a result this analysis leads to the detection of an international PLC classification. Moreover, it turns out that the order of entry is not only crucial to achieve a certain market share level but also to the shape of the drug life cycle and therefore for the long-term economic evaluation of innovative products. The paper provides the initial findings on this subject through a simulation study which is in line with previous research designs and shows the impact of the PLC shape on the net present value (NPV).

Despite the growing body of research on the marketing-finance interface, there have been only limited attempts to integrate results and derive empirical generalizations. Such generalizations would be especially relevant to marketing managers seeking to increase marketing’s accountability within and outside of the firm, as well as to the investor community, which is still reluctant to integrate marketing variables within their investment decisions and firm valuations. Alexander Edeling and Marc Fischer fill this research gap by conducting a meta-analysis of econometric elasticity estimates of the impact of marketing variables on firm value. Analyses are based on 488 elasticities drawn from 83 studies using data from North and South America, Europe, and Asia spanning 40 years (1971-2011). They reveal a mean elasticity of .04 for advertising-expenditure variables and .54 for marketing-asset variables that include brands and customer relationships. The finding that most marketing firm-value elasticities are positive offers two important insights for managers: First, it shows that investing in marketing is indeed value-relevant, since the majority of elasticities is positive. In particular, the large magnitude of marketing-asset elasticities suggests that the potential for firm value growth is substantial. Second, from an optimization point of view, the results suggest that firms are still underinvested in brands and customer relationships, since the elasticities should be zero at optimal investment levels. This again appears to be more relevant to marketing assets than advertising expenditures, since marketing-asset elasticities are, on average, much greater than advertising elasticities. With respect to marketing-asset variables, their results also suggest that it is preferable to combine brand and customer perspectives, rather than focus narrowly on one “right” marketing metric. Finally, the analysis reveals heterogeneous firm-value effects of marketing variables between different industries.

In an experimental simulation study, Marc Fischer, Nils Wagner, and Sönke Albers investigate the performance of four methods in allocating a fixed marketing budget across products and marketing activities to maximize discounted portfolio profit over a five-period planning horizon. These methods include a naïve allocation (an equal distribution across all products and activities, ignoring heterogeneity in the product portfolio), a percentage-of-sales rule (total budget is allocated proportional to the previous year’s sales), an attractiveness heuristic (which incorporates information on the profit improvement potential of allocating a higher budget to the unit), and a numerical optimization method (which generates optimal budgets for a specified problem). They apply the allocation rules in a multitude of systematically varied scenarios in order to analyze and compare their performance as well as their sensitivity to different characteristics of the market environment. Their evaluation is based on the profit gained by application of the respective allocation rule compared to the optimal solution. Since it would be unrealistic to assume that managers know the true values of unobservable demand parameters, they analyze the sensitivity of the different rules by imposing an estimation error, which affects the parameters of interest. Their study reveals important insights into the performance characteristics of the methods. A theoretically founded heuristic rule, such as the attractiveness heuristic, converges quickly to the optimum and is reliable even under extreme conditions. An exact method such as numerical optimization is optimal by definition. However, if true demand parameters are not known but estimated with an error, numerical optimization no longer produces optimal results. In fact, its suboptimality is considerably higher than that of the attractiveness heuristic. The percentage-of-sales rule produces better allocation results over time and outperforms numerical optimization in extreme scenarios with noisy demand parameters. The heterogeneity of marketing responsiveness and product age have the greatest influence on the performance of an allocation method.These insights have important implications for managers, most notably that an exact method such as numerical optimization is inferior to a decision heuristic if it is applied under the realistic assumption that true demand parameters are unknown. Overall, theoretically derived heuristics such as the attractiveness heuristic demonstrate a remarkably reliable performance.

[Featured article in Insights from MSI and among Top 5 downloads in 2007]

Shareholders, creditors, and other stakeholders are increasingly demanding that the value of intangibles be reflected in financial reports. Further, empirical research in accounting reveals that intangible assets such as brand equity are highly relevant to value. In this study, author Marc Fischer proposes a new measure of financial brand valuation. He extends previous research on brand valuation by providing a measure that is consistent with modern accounting standards. In particular, the measure meets the requirements of future-orientation, objectivity, completeness, comparability, simplicity, and cost-effectiveness. In addition, it can be adapted to organization-specific conditions of planning and reporting. The measure integrates Keller’s (1993) concept of customer-based brand equity with the customer equity modeling framework suggested by Rust, Lemon, and Zeithaml (2004). The financial value of a brand at the individual level is obtained by multiplying the brand equity share with customer lifetime value, and aggregation across all customers produces the market-level brand value. The author tests the proposed brand equity model with data from three representative surveys that cover consumer durables (automobiles), fast-moving consumer goods (cosmetics), and retail services (groceries). He also suggests a simplified brand valuation method, and finds that the simpler method is able to replicate the results of the proposed model. The suggested measure offers significant benefits to practitioners: it directly models the goal that practitioners have in mind when they think about separating the brand asset from other assets. Further, it permits the application of established valuation routines that often preexist in companies and reduces market research costs to a minimum. The methodology has been successfully applied to value more than 50 brands covering diverse industries in 11 countries. A major impetus for its adoption was its cost-effectiveness and compatibility with existing company planning and reporting procedures. 

Since 1997, when the Food and Drug Administration relaxed restrictions targeting advertising to patients, expenditures on direct-to-consumer (DTC) advertising have tripled, from U.S. $1.1 billion in 1997 to U.S. $3.3 billion in 2005. While DTC advertising for prescription drugs provides new opportunities for marketers, health care professionals and policymakers debate the value of such patient-oriented marketing efforts. For example, policymakers and insurers argue that DTC advertising expands demand for expensive, branded products and therefore inflates health care costs. Physicians suggest further that patient-oriented marketing efforts may create demand for potentially dangerous products. What are the market-expanding effects of DTC advertising as compared to advertising directed at physicians? In this study, authors Fischer and Albers analyze the effects of marketing efforts directed at patients through DTC advertising versus marketing efforts directed at physicians through detailing (personal contact by sales representatives) or professional journal advertising. They suggest a new method for measuring primary demand effects with aggregate data at the brand level and apply their model to 86 categories of the U.S. pharmaceutical market from 2001-2005. They find that physician-oriented marketing efforts such as detailing are effective in increasing primary demand, that is, in expanding the market rather than substituting sales from competitors. In contrast, patient-oriented marketing efforts such as DTC show negligible effects on primary demand. However, DTC advertising appears to be quite effective in stealing sales from competitive brands. From a marketing standpoint, these findings suggest that managers should carefully analyze the potential countereffects of a DTC campaign. If competitors retaliate to that campaign by increasing their DTC expenditures, the net sales effect could be zero, with a negative impact on profit. From a public policy standpoint, DTC advertising does not appear to increase demand for products that may be potentially dangerous. However, the effectiveness of detailing suggests that this type of marketing effort may provide incentives to physicians to prescribe drugs that are not required from a medical perspective. In such cases, health care costs rise, with negative consequences for social welfare.    

Can a late-mover brand challenge the pioneer in a country by the choice of an appropriate international market entry strategy? A growing number of empirical studies have revealed interesting relationships between order of entry and market share and between marketing spending and market share for brands.These studies indicate that there are advantages both in being the pioneer and in being a late mover. In the case of late movers, two dimensions of international market entry strategy, namely, international market scope (extent of exposure to an international customer base) and the speed of international rollout (sprinkler, or fast rollout, versus waterfall, or slow rollout, strategy), may have a moderating effect on the connection between order of entry and market share and between marketing spending and marketing share. Here, authors Fischer, Clement, and Shankar develop a conceptual framework that captures those moderating effects.They develop and estimate a rigorous econometric model of relative market share that accounts for the endogeneity of international entry strategy, order of entry, firm resources, brand quality, and other decision variables, as well as for unobserved effects, using pharmaceutical data on 73 brands from two product categories in eight European markets during 1987-96. The results show that broader international market scope is associated with lower penalty for late entry and greater elasticity of marketing spending for late-mover brands. Surprisingly, however, speed of rollout is unrelated to late entry penalty, although a waterfall rollout strategy is associated with a greater elasticity of marketing spending. The authors conclude that late-mover brands operating in an international environment can challenge the market pioneer through an international market entry strategy that involves a sequential entry into many large international markets.

The importance of quality and customer satisfaction has dramatically acceleratd over the past twenty years. Given the need to maintain high quality, practitioners and academics have devoted increasing effort on how to measure quality or customer satisfaction. Three popular methods that are currently used for determining which attributes are the most important to satisfy the consumer are #gap analysis’, linear regression of the overall satisfaction rating on the ratings for the attributes, and conjoint analysis. Unfortunately, these methods have shortcomings. While regression analysis is able to accommodate linear relationships among the predictor variables in principle conjoint analysis assumes the absence of such interdependencies. However, multicollinearity often is severe in satisfaction regression models and causes unstable parameter estimates. This paper presents a new method which is to address the aforementioned problems in satisfaction measurement. We outline the application of the supermatrix-approach to determine the relative importance weights of interdependent service attributes. The empirical example is drawn from the tourism industry.

Stimuli coming from pictures have always been considered very important. They are said to have a great effect on the human organism compared with stimuli in textual form. While language is a coded semiotic system which the recipient of a message can decode with a cognitive effort only, pictures are perceived at a less abstract level as part of the real environment (Paivio 1986). The pictorial superiority effect is related to a great number of theoretical constructs known in the behavioral and social sciences. In this paper we attempt to integrate the diverse empirical findings since 1960 on the effect of communication through pictures and discuss the results of a meta-analysis.

As the information overload and an extension of the mass media reduces the possibility to get the message to the target group, the firms have to increase their advertising budget to reach the same amount of ad contacts. To be sure, that they don’t waste the money, the companies more often use the instrument of pretesting the commercial campaign. The aim of this paper is to document the advantages of the conjoint-analysis (CA) as a technique for pretesting ads. To evaluate the possibility of using the CA we try in to measure in an empirical study, if informative and emotional ads have an influence on the preferences of the respondent.

To the surprise of many, pharmaceutical firms belong to the biggest spenders on marketing. The marketing spend-to-sales ratio may be as high as 30 %. Expenditures in the USA alone were $ 10.9 billion in 2009. Hence, there is a strong interest in understanding how effectively this industry spends its marketing money.

The objective of this chapter is to review and synthesize the literature on marketing spending in the pharmaceutical industry. It reviews recent trends in pharmaceutical marketing. It looks at how marketing managers in the pharmaceutical industry actually arrive at spending decisions. The author further discusses models that describe how pharmaceutical demand responds to marketing expenditures. He summarizes findings on the responsiveness and profitability (ROI) of various spending categories.

Another focus of the chapter is on normative applications of marketing spending models. Normative models help finding the right budget across spending categories, customer groups, and products. The discussion covers static and dynamic optimization approaches. The author identifies fields of promising future research from this synthesis of the extant literature.

It is well established that when companies’ products cause real (albeit unintended) harm to consumers – such as supermarkets selling tainted or infected food products, which are then recalled – both brand equity and corporate financial performance suffer as a result. The scale and duration of this impact depends on a number of factors, including a brand’s track record and established consumer goodwill, as well as how quickly brand custodians respond to the crisis.

Much less well understood are the effects of companies and corporate leaders behaving badly. In the first study of its kind and depth undertaken, our research group has assessed for the first time the impact on companies shown to be guilty of corporate social irresponsibility (CSIR) or misbehavior, such as bribery. A pioneering study by Max Backhaus and Marc Fischer has found that acts of corporate misbehavior, such as bribery or corruption can have deeper and more enduring impact than product failure and recall. Max Backhaus explains.

Click here to read the article.

Dormant brands are brands that are not available in the market anymore. Nevertheless, they may be present in the consumers’ minds. Consumers will not completely forget brands, which had a high degree of brand awareness, when they have been in the market. Familiar brands evoke positive, strong and unique associations. These imaginations and structures in consumers’ minds are resistant against environmental influences and only wear off slowly. Thus, the re-launch of such a brand provides an opportunity for a firm due to its dormant, but still high value. To measure this value, the authors have developed a new approach. This article introduces this approach and determines its underlying components

Movies follow a very short life cycle in cinemas. Box office sales have strong effects on the financial success in subsequent phases of revenue generation such as the selling of DVDs or licensing to TV-stations. We apply the event study methodology to analyze the impact of several potential events (e.g., box office sales of the first weekend) in the early stage of the movie life cycle that may be relevant to a firm's value. We find that the day following the release day has a significant impact on stock prices. Furthermore, we find evidence that the announcement of box office sales of the second weekend also influences stock prices.

This paper analyzes how the scope and speed of internationalization have direct and indirect effects on market share. The analysis suggests that managers benefit from a broad but slow introduction oft the new product into many large national markets. The expected market share in the focal product market will be higher under such circumstances. This positive effect is due to a reduction of systematic market share disadvantage that arises from late market entry and an increase in the efficiency of marketing spending. We provide arguments for these effects that are based on consumer and organizational learning theories.  

Previous empirical research on order of entry effects shows strong evidence for the existence of a first-mover advantage. Conventional strategic recommendations are therefore based on the assumption that pioneering is preferable in order to create competitive advantages. However, theoretical work has argued that there are also considerable potential advantages for early movers. But this hypothesis lacks empirical evidence, which is due to the limitations of previous empirical research designs. On the one hand, early movers have not been precisely separated from pioneers and late movers. On the other hand, previous research designs often specified a monotone relationship between order of entry and a success variable. As a consequence, it was not possible to find an inverted u-shaped relationship supporting the early mover advantage hypothesis. In this study, authors propose ways to overcome these limitations. An empirical application to 12 pharmaceutical markets finds a surprising early mover advantage that contrasts with the conventional wisdom in this industry.

Successful building and managing brands is a key topic for many companies. However, like any other activity brand expenditures must be justified in economic terms. This leads directly to the question of how important brands are to customers in a choice situation. The investigation of this issue should precede any discussion on brand investment. The importance of brands in the eyes of the customer determines the lever brand management offers to companies. This paper focuses on the explanation and estimation of brand relevance in consumer goods markets. The authors introduce the term brand relevance into the literature which is a customer based metric of the importance of brand management. They develop a conceptual framework to explain how brand relevance is determined by the needs brands satisfy for the customer in a product market. A representative survey among consumers provides empirical evidence on the relevance of brand management in 45 product markets. The results also reveal which needs should be satisfied by brands in different product markets. The authors present empirical findings on the relative importance of these needs.

[Lead article]

The position of line extensions as a product policy option remains unchallenged. Estimates of their share in new product launches in consumer good markets range from 80 to 95 %. A problem that will always be connected with the introduction of a line extension is cannibalization. But not only the extent of cannibalization is important. The sales of each product can be split into the three components, competitive substitution, cannibalization, and primary demand. The authors propose a simple method of decomposing line extension sales. The individual sales components can be measured with least squares techniques which is shown with an empirical study on line extensions in the market for pharmaceuticals.

The product life cycle (PLC) represents a pivotal management instrument. Although, during the past decades, many studies have addressed the PLC, several issues remain unsolved. So knowledge is particularly limited, when it comes to the drivers and conditions that lead to a change in length and composition of PLC phases. Here, research lacks theoretical as well as empirical work. The objective of this research is, hence, to develop a theoretical framework for the life cycle of a newly introduced product. This framework especially considers the order of entry and the entry of further competitors into the market. Our hypotheses build on theories on the supply as well as the demand side. As a result this research links and extends the theories of PLC to first mover advantages.

This article introduces a method to calculate the profitability of a firm’s entire activities on customer satisfaction. The authors develop a profitability measurement, the return on customer satisfaction (ROCS)-index, which may be integrated into any scorecard. They show the usefulness of their approach in an empirical study in the German automotive industry based on 40.000 respondents. The ROCS approach provides better estimates for the satisfaction-loyalty-relationship than many other approaches such as the binominal regression model. In addition, empirical evidence supports that the profit maximizing level of customer satisfaction is far below 100%. 

[Lead article]

The product life cycle is a widely accepted and applied concept. Despite extensive research efforts in the 70’s and 60’s further research need exists in view of a number of unresolved problems. The empirical generalization represents a substantial point of criticism of the product life cycle. The authors propose an integrated methodological approach for estimating and classifying product life cycles. Its applicability is demonstrated on the basis of an international study of four product categories for pharmaceuticals. It turns out that the order of entry is not only crucial to achieve a certain market share level but also tot he shape oft he drug life cycle. The paper provides first theoretical and empirical findings on this subject.

The importance of pictures in all modern types of communication is still growing. It is soften argued that pictures have a particular effect on behavior. The low effort adoption, processing and storage of information support this hypothesis. Furthermore, pictures favor the transportation of emotions. Therefore, the often cited pictorial superiority is not astonishing. The particular effect of pictures has been an issue of empirical research in the social sciences since the early 1960’s. A large body of knowledge exists from studies with different aims and experimental conditions by now. This paper, for the first time, integrates these manifold empirical findings concerning the picture effect and derives empirical generalization. For this purpose we apply advanced methods of meta-analytic research. On the basis of the results from this meta- analysis we are able to make statistical inferences about the particular effects of pictures under different conditions.

This article reviews the requirements for methods of dynamic sales analysis from an index theoretical and managerial point of view. This integrative investigation leads to a set of generalized criteria. On the basis of these criteria the authors evaluate various existing methods of sales variance analysis with structure components. On the one hand, the strengths and weaknesses of the linear-additive and multiplicative sales variance analysis are compared. On the other hand, the authors evaluate the existing models as to their theoretical consistency and criterion validity. As a result they deduce a new model which fits to the requirements. An empirical study in the German market for pharmaceutical generics shows the potential of an application of the sales variance analysis in a strategic context.

The requirements for innovation management have changed through the globalization of competition, the fragmentation of markets, and the individualization of customer requirements. They demand for a higher diversity of products and shorter innovation cycles. In the handbook on technology and innovation management, renowned researchers and managers document the current knowledge and future directions of developments on a broad, interdisciplinary base. In firm cases, they pick up current topics and describe their implementation in practice. In the 2nd edition, all contributions have been revised, and current developments have been integrated. New contributions on innovative business models, R&D in China, management of innovation processes across industries, innovation culture at Gore etc. have been included.

1Innovation and new technologies generate benefits and show path to break out of the cost trap. In highly developed countries, such as Germany, the US, and Switzerland, only half of the growth result from work and capital; the other half results from technologies and innovations. Studies show that, on average,  innovative firms achieve higher margins. Hence, the German president Köhler demands in his inaugural speech that Germany should become a country of ideas again. However, solely ideas are not sufficient. Here, many questions remain unanswered: How should we manage new technologies and innovations? Which technologies should we choose? How should we organize innovation? How can we manage innovation processes effectively and efficiently? How should we place innovations on the market? Which methods are available, which methods have succeeded in the past? How can we protect innovations effectively? The requirements for the management of innovations have changed dramatically through the recent years: further globalization of competition, fragmentation of markets and increasing individualization of customer requirements demand for a higher diversity of products and shorter product life cycles. Contrarily, technology development become strongly more complex and dynamic; “low hanging fruits” have been gained since long ago, escalating R&D costs and increasing commercialization risks are the consequences. With increasing technology dynamic, technology and innovation management becomes a core management function, in many industries even the most important management function to create comparative advantages. The business perspectives on technology management reflect a cross section of current business research.

The buildup and maintenance of brands involve high costs for companies. They have to invest into advertising and other marketing tools to generate a suitable brand positioning. However, do these costs pay off in the long term? How strongly do consumer’s purchase decisions depend on brands? Which trends will persist and evolve in future? The measurement of brand relevance helps to get intuitions on these and similar questions. It reflects the importance of a brand for a purchase decision in relation to other criteria such as the price. This article examines the measurement of brand relevance over twelve years and 20 product categories and deduces five key findings on its development within the individual categories.

Dormant brands are brands that are not available in the market anymore. Nevertheless, they may be present in the consumers’ minds. Consumers will not completely forget brands, which had a high degree of brand awareness, when they have been in the market. Familiar brands evoke positive, strong and unique associations. These imaginations and structures in consumers’ minds are resistant against environmental influences and only wear off slowly. Thus, the re-launch of such a brand provides an opportunity for a firm due to its dormant, but still high value. To measure this value, the authors have developed a new approach. This article introduces this approach and determines its underlying components. 

Saturated markets and limited varieties of similar products with nearly no differences in quality, challenge brands to stand out in new ways. Advertising, design etc. should create emotional, unique selling propositions when consumers are not able to perceive qualitative differences. Attractive packaging and striking advertising are supposed to invite consumers to try these products and to eventually stay with these. It is therefore a central question, which testimonial fits best to achieve the communication goal of a firm. This article introduces a new scientifically founded index to aid the process of choosing celebrities for advertising purposes. 

Marketing budget decisions are critical and should be fact based rather than intuitive. Profit can be improved by better allocating a fixed budget across products or regions. The Excel-based decision support model presented in this article makes it possible to determine near-optimal marketing budgets and represents an innovative and feasible solution to the dynamic marketing allocation budget problem for multi-product, multi- country firms. The model accounts for marketing dynamics and a product’s growth potential as well as for trade-offs with respect to marketing effectiveness and profit contribution. It was successfully implemented at Bayer, one of the world’s largest firms in the pharmaceuticals and chemicals business. The profit improvement potential in this company was more than 50 % and worth nearly EUR 500 million in incremental discounted cash flows. 

Brands are assets and thus hold an economic value. Hence, they are part of the financial statements. But which value should be reported for Nivea, Mercedes and Co.? Consumers link brands to unique positive attributes. Brands which are successful in the long run distinguish themselves by the features Science, Art, and Craft: the science to measure and to understand the performance parameters of a brand, the art to precisely represent the underlying promise of a brand in a creative way, and the craft to manage all aspects of a brand consistently. To measure these features, the consultancy McKinsey and the Institute for Research and Innovation of the University of Kiel developed a simple and easily understandable approach to assess the value of brands. 

The measurement of marketing performance is essential to prove that marketing measures have a substantial financial impact. Concerning the financial impact itself, it is pivotal to consider the long-term financial effects and not to focus exclusively on short-term indicators as revenue, profit or market share within one period. Importantly, the impact of marketing is often only visible in the long-term. Besides influences of marketing activities interact with many factors in a complex environment. This article introduces a selection of important instruments for the measurement of marketing performance and provides guidance to choose the adequate instrument. 

Issues of innovation acceptance characterize online shopping behavior. The empirical results of this study show that the use of online shopping depends on the familiarity with the internet and advertising impulses. Although customers perceive high risks in online shopping, they are not reluctant to buy products online.

The costumer value reveals a strong connection to customer satisfaction. It is important to quantify this effect as it provides useful knowledge on customer management and development. This article addresses the “return on customer satisfaction” as an instrument that is necessary for this quantification. We show how it may provide an optimal profit for a specific satisfaction level. In this optimum, cost- and loyalty-efficiency are in an equilibrium concerning their contribution to customer satisfaction.

Not the risk of a transaction, but the familiarity with Internet is necessary to estimate how consumers use online shopping as an alternative to offline shopping. Prof. Dr. Hans H. Bauer, Marc Fischer, and Nicola Sauer have interviewed 700 internet-users in Germany and the USA on their attitude towards online shopping. This article summarizes the key results of their survey.

Product elimination is looked at as a way for business sets to focus on core competences. Considering the fact that a 20–50% flop rate of introductions into consumer markets exists, the significance of product elimination resulting from failure to enter markets becomes even more evident. This is also true during times of core concentration, where even profitable business parts are eliminated. Based on the fuzzy-set theory, this article provides an approach to identify successful product elimination.

Line extensions are a key instrument within the product policies of pharmaceutical companies. Overall, they consider the introduction of combination preparations, new administration and dosage forms. It is hence important for product managers to know the conditions that lead to the success of these line extensions. One key factor is a firm’s initial strategic situation that is inter alia characterized by the intensity of competition in a respective market and the features of the parent brand (e.g., its goodwill potential). Product managers cannot influence these factors in the short run, but may consider them in their long-term planning. Nonetheless, they can control the instruments of strategic and operative product management such as strategic positioning, pricing, advertising pressure, or a firm’s sales force. A powerful use of these instruments strongly influences the degree of innovation from a line extension and, thus, the evaluation of its efficiency. This article analyses and discusses the conditions of successful line extensions on the basis of 64 new product introductions in 3 product markets and 4 European countries. The empirical results provide a reliable basis to forecast the success of a line extension based on its achievable market share.