http://repub.eur.nl/res/aut/9941/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/1062/ 2003-11-27T00:00:00Z The use of price promotions to stimulate brand and firm performance is increasing. We discuss how (i) the availability of longer scanner data time series, and (ii) persistence modeling, have lead to greater insights into the dynamic effects of price promotions, as one can now quantify their immediate, short-run, and long-run effectiveness. We review recent methodological developments, and illustrate how the analysis of numerous brands and product categories has resulted in various empirical generalizations. Finally, we argue that persistence modeling should not only be applied to traditional performance metrics such as sales, but also to metrics such as firm value and customer equity. http://repub.eur.nl/res/pub/175/ 2002-03-06T00:00:00Z How do competitors react to each other's price-promotion and advertising actions? How do these reactions influence the net sales impact we observe? We answer these questions by performing a large-scale empirical study of the short-run and long-run reactions to promotion and advertising shocks in over 400 consumer product categories, over a four-year time span. Competitive reaction can be passive, accommodating or retaliatory. We first develop a series of expectations on the type and intensity of reaction behavior, and on the moderators of this behavior. These expectations are assessed in two ways. First, vector-autoregressive models quantify the short-run and long-run effect of a promotion or advertising action on competitive sales and on competitive reactions. By cataloging the numerical results, we are able to formulate empirical generalizations of reaction behavior ("how do they react?"). Second, we estimate structural models of reaction intensity, in function of various market and competitive characteristics ("what are the drivers of reaction?"). Finally, by comparing our findings on reaction behavior with those on promotion and advertising effectiveness, we are able to evaluate competitive reaction behavior ("are they reacting as they should?"). A major finding is that competitive reaction is predominantly passive. When it is present, it is usually retaliatory in the same instrument, but accommodating or retaliatory in a different instrument. There are very few long-run consequences of any type of reaction behavior. We also report on several moderating effects that are in line with expectations, and that support the presence of a certain amount of rationality in competitive reaction behavior. The net impact of the over-time effects of advertising and price-promotion attacks, competitive reactions and the sales effectiveness of each, is that competitors' sales are generally not affected, and especially not in the long run. We weigh the evidence that this sales neutrality is "natural" (i.e., due to the nature of consumer response) versus "managed" (i.e., due to the vigilance and effectiveness of competitors), and conclude in favor of the former.