Abstract
Brand management is typically defined as the way in which brands are positioned in the marketplace, both in terms of tangibles such as price, packaging and the marketing mix and intangibles such as consumer perceptions and brand equity. The conventional marketing mix model is often used to inform the tangible elements, but is lacking into two key aspects. Firstly, it ignores the role of intangibles. Secondly, the focus is solely on individual brands in isolation. This ignores the wider competitive context, where the decision to choose one brand is the simultaneous decision not to choose another. Successful brand management, however, requires a simultaneous holistic view of all players. To address both issues, this article argues for a dynamic time series version of the discrete choice attraction model. Firstly, the demand system structure treats the entire category as a single unit, capturing competitive steal, cannibalisation, halo and category expansion effects of brand-specific marketing. This provides accurate marketing return on investment and budget allocation, facilitating the manufacturer-retailer relationship. Secondly, the time series approach allows us to quantify the evolution and drivers of consumer brand tastes – critical to understanding brand intangibles. This enables managers to set marketing strategy for optimal long-term brand performance.
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Notes
For an analysis of the dynamic AIDS model, see Cain (2005).
The log-centred form of the attraction model is fully discussed in Nakanishi and Cooper (1974). The log-ratio approach used in the text provides equivalent parameter estimates and is easier to work with (see Houston et al, 1992).
Note that the parameter estimates of (1) are reduced form in that they are a composite of structural and residually defined parameter estimates of the pth product. Cross effect parameter restrictions can also be applied to simplify the model structure and reduce potential collinearity problems.
This is fully in keeping with the discrete choice model structure, which naturally handles new product introductions. This is because the model form is based on indirect utility as a function of product characteristics (Lancaster, 1966), where preferences are over the attributes and not the product per se. Consequently, it is natural to introduce a new product with marketing attributes that already exist in the marketplace.
Note that online drivers such as paid search and display are essentially outcome variables to be explained simultaneously with sales and thus endogenous. This follows directly from the modern offline-online consumer purchase journey as outlined in Cain (2014).
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Cain, P. Brand management and the marketing mix model. J Market Anal 2, 33–42 (2014). https://doi.org/10.1057/jma.2014.4
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DOI: https://doi.org/10.1057/jma.2014.4