Persistence Modeling for Assessing Marketing Strategy Performance

1 The financial support by the Flemish Science Foundation (F.W.O.) under grant G.0116.04 is greatly appreciated. We also thank Christine Moorman and Donald Lehmann for their constructive comments on a previous version of the article. 2 INTRODUCTION The question of long-run market response lies at the heart of any marketing strategy that tries to create a sustainable competitive advantage for the firm or brand. A key challenge, however, is that only short-run results of marketing actions are readily observable. Persistence modeling addresses the problem of long-run market-response quantification by combining into one measure of " net long-run impact " the chain reaction of consumer response, firm feedback and competitor response that emerges following the initial marketing action. In this paper, we (i) summarize recent marketing-strategic insights that have been accumulated through various persistence modeling applications, (ii) provide an introduction to some of the most frequently used persistence modeling techniques, and (iii) identify some other strategic research questions where persistence modeling may prove to be particularly valuable. CONCEPTS Suppose you are a marketing executive contemplating the launch of a costly marketing campaign whose objective is to lift the sagging sales performance of a brand. Naturally, the anticipated sales increase as a result of this campaign should be a primary criterion to decide whether or not to make the engagement. Indeed, the campaign should be viewed as an investment of the company's time, money and reputation. This investment is expected to yield a net positive return that is higher than that of alternative uses of these scarce resources. However, the potential impact of marketing campaigns on sales and, ultimately, profits, extends well beyond the spending period. Both the marketing literature and managerial experience teach us, for example, that advertising effects are subject to a wear-in or build-up phase, followed by a wear-out phase (Hanssens, Parsons and Schultz 2001). These and other overtime effects of marketing apply not only to consumer response. Indeed, a successful campaign may result in feedback effects on internal decision making, for example when the observed sales lift attributed to advertising results in subsequent increases in advertising budget allocations. Similarly, competitors may imitate or retaliate against a campaign that is perceived as a threat to their business 3 performance. Whether or not our hypothetical marketing campaign is ultimately successful will depend on the combined forces of consumer response, performance feedback and competitive reactions, and how these forces shape the …