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Exceptional Paper--ADVISOR 2: Modeling the Marketing Mix Decision for Industrial Products

By Gary L. Lilien

Abstract

This paper reports the results of the ADVISOR 2 study, aimed at providing an understanding of and guidance for marketing mix decisions for industrial products. The study involved 22 companies and 131 products. Although cross-sectional in nature, justification is presented for using the descriptive results as guidelines for marketing mix decisions. Models are presented for advertising expenditures, marketing expenditures, marketing budget allocations, year-to-year changes in advertising spending and for selection of distribution channels. The level of marketing expenditures and the split of marketing into advertising and personal setting are shown to be affected by a few, general product and market characteristics of which product sales and the number of customers are key. It is shown that it is fruitful to study the advertising budget as advertising = (advertising/marketing) \times marketing; i.e., a marketing budget is set and then a split of that budget into personal and impersonal communications is made. This two-stage view clarifies the role of different product and market characteristics in the models. The change in advertising spending is related to changes in market share, changes in product plans and changes in the number of competitors modified by the number of customers, their concentration and the size of the advertising budget. The decision to use a direct channel of distribution (primarily salesforce) is affected by the size of the firm, the size of an average order, the stage in the product's life cycle, the complexity of the product, the fraction of the product's sales made-to-order and the purchase frequency of the product. A discussion of the use of the ADVISOR models both for marketing decision making and for marketing researchers and model builders is included.marketing: advertising/promotion, marketing: mix, industrial marketing

DOI identifier: 10.1287/mnsc.25.2.191
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