Wheatering tight economic times: the sales evolution of consumer durables over the business cycle.

Despite its obvious importance, not much marketing research focuses on how business-cycle fluctuations affect individual companies and/or industries. Often, one only has aggregate information on the state of the national economy, even though cyclical contractions and expansions need not have an equal impact on every industry, nor on all firms in that industry. Using recent time-series developments, we introduce various measures to quantify the extent and nature of business-cycle fluctuations in sales. Specifically, we discuss the notions of cyclical volatility and cyclical comovement, and consider two types of cyclical asymmetry related, respectively, to the relative size of the peaks and troughs and the rate of change in upward versus downward parts of the cycle. In so doing, we examine how consumers adjust their purchasing behavior across different phases of the business cycle. We apply these concepts to a broad set (24) of consumer durables, for which we analyze the cyclical sensitivity in their sales evolution. In that way, we (i) derive a novel set of empirical generalizations, and (ii) test different marketing theory-based hypotheses on the underlying drivers of cyclical sensitivity. Consumer durables are found to be more sensitive to business-cycle fluctuations than the general economic activity, as expressed in an average cyclical volatility of more than four times the one in GNP, and an average comovement elasticity in excess of 2. This observation calls for an explicit consideration of cyclical variation in durable sales. Moreover, even though no evidence is found for depth asymmetry, the combined evidence across all durables suggests that asymmetry is present in the speed of up- and downward movements, as durables' sales falls much quicker during contractions than recover during economic expansions. Finally, key variables related to the industry's pricing activities, the nature of the durable (convenience vs. leisure), and the stage in a product's life cycle tend to moderate the extent of cyclical sensitivity in durable sales patterns.Business cycles; Companies; Consumer durables; Econometrics; Economy; Firms; Hypotheses; Industry; Information; Market; Marketing; Pricing; Product; Purchasing; Sales; Sales evolution; Sensitivity; Size; Time; Time-series econometrics; Time series; Variables; Volatility;

Drivers of the synergy between price cuts and store flyer advertising at supermarkets and discounters

Despite retailers’ intense use of both price cuts and store flyer advertising, it is still unclear whether and when it is beneficial for retailers to combine the two promotion tools at the same time as opposed to using them separately. We systematically investigate synergies between price cuts and store flyers for a broad set of 488 brands from 44 consumer packaged goods categories across six leading German retailers. We find that a clear majority of the brands benefit from positive synergies and hence, combining price cuts and store flyer advertising is recommended, especially at supermarkets. This synergy can be strong. For instance, a 15% price cut without store flyer support at a supermarket, on average, increases sales by 11%, and medium spending on store flyers for the brand at its regular (non-promoted) price results in a sales lift of 8%. The combined use of both tools, however, increases sales by 52%, much more than the sum of their separate effects (11% + 8% = 19%). Yet, there is also substantial variance in the synergy, which we explain with retailer format (supermarkets versus discounters) as well as various brand and category characteristics. Our findings have important implications for the coordination of promotion activities by retailers

Weathering Tight Economic Times: The Sales Evolution Of Consumer Durables Over The Business Cycle

Despite its obvious importance, not much marketing research focuses on how business-cycle fluctuations affect individual companies and/or industries. Often, one only has aggregate information on the state of the national economy, even though cyclical contractions and expansions need not have an equal impact on every industry, nor on all firms in that industry. Using recent time-series developments, we introduce various measures to quantify the extent and nature of business-cycle fluctuations in sales. Specifically, we discuss the notions of cyclical volatility and cyclical comovement, and consider two types of cyclical asymmetry related, respectively, to the relative size of the peaks and troughs and the rate of change in upward versus downward parts of the cycle. In so doing, we examine how consumers adjust their purchasing behavior across different phases of the business cycle. We apply these concepts to a broad set (24) of consumer durables, for which we analyze the cyclical sensitivity in their sales evolution. In that way, we (i) derive a novel set of empirical generalizations, and (ii) test different marketing theory-based hypotheses on the underlying drivers of cyclical sensitivity. Consumer durables are found to be more sensitive to business-cycle fluctuations than the general economic activity, as expressed in an average cyclical volatility of more than four times the one in GNP, and an average comovement elasticity in excess of 2. This observation calls for an explicit consideration of cyclical variation in durable sales. Moreover, even though no evidence is found for depth asymmetry, the combined evidence across all durables suggests that asymmetry is present in the speed of up- and downward movements, as durable sales fall much quicker during contractions than they recover during economic expansions. Finally, key variables related to the industry's pricing activities, the nature of the durable (convenience vs. leisure), and the stage in a product's life cycle tend to moderate the extent of cyclical sensitivity in durable sales patterns

The Impact of Business-Cycle Fluctuations on Private-Label Share

This study investigates the cyclical dependence of private-label success in four countries. The results show that private-label share behaves countercyclically. Moreover, asymmetries are present in both the extent and speed of up- and down-ward movements in private-label share over the business cycle. Finally, part of private-labels’ share gain during contractions is found to be permanent

The Role of National Culture in Advertising’s Sensitivity to Business Cycles: An Investigation Across All Continents

Cutting advertising budgets has traditionally been a popular reaction by companies around the globe when faced with a slacking economy. Still, anecdotal evidence suggests the presence of considerable cross-country variability in the cyclical sensitivity of advertising expenditures. We conduct a systematic investigation into the cyclical sensitivity of advertising expenditures in 37 countries across all continents, covering up to 25 years and four key media: magazines, newspapers, radio and television. While our findings confirm that advertising moves in the same direction as the general economic activity, we also show that advertising is considerably more sensitive to business-cycle fluctuations than the economy as a whole, with an average co-movement elasticity of 1.4. Interestingly, advertising’s cyclical dependence is systematically related to the cultural context in which companies operate. Advertising behaves less cyclically in countries high on long-term orientation and power distance, while advertising is more cyclical in countries high on uncertainty avoidance. Further, advertising is more sensitive to the business cycle in countries characterized by significant stock-market pressure and few foreign-owned multinationals. These results have important strategic implications for both global advertisers and their ad agencies

Win-Win Strategies at Discount Stores

An important development that contributes to store brands’ growing success in the grocery market is the increasing number of discount stores that sell predominantly own, private-label, brands. To fight private labels, manufacturers of national brands feel increasingly compelled to develop better trade relations with discounters. Some discounters, from their part, are looking for opportunities to differentiate themselves, and to move beyond a pure price-based competition, by extending their assortment with attractive national brands. In this study, we determine what factors drive national-brand success at discount stores, and lead to positive outcomes for both the manufacturer and the discounter