Managing Advertising and Promotion for Long-Run Profitability
Kamel Jedidi, Carl Mela and Sunil Gupta ask whether advertising or promotion is more desirable for a brand, whether frequent shallow or infrequent deep promotions work better, and how regular price changes compare with promotions. They fit a varying-parameter choice and quantity model to more than eight years of panel data from a consumer packaged-goods category, allowing consumers' short-term response to change and competitors to react. Advertising has a positive effect on brand equity and promotions a negative one, and the long-term effect of promotions on sales is negative. Profit simulations find regular price cuts generally reduce long-term profit and increases in price promotions are unprofitable for all the brands studied.
Kamel Jedidi, Carl Mela and Sunil Gupta ask whether advertising or promotion is more desirable for a brand, whether frequent shallow or infrequent deep promotions work better, and how regular price changes compare with promotions. They fit a varying-parameter choice and quantity model to more than eight years of panel data from a consumer packaged-goods category, allowing consumers' short-term response to change and competitors to react. Advertising has a positive effect on brand equity and promotions a negative one, and the long-term effect of promotions on sales is negative. Profit simulations find regular price cuts generally reduce long-term profit and increases in price promotions are unprofitable for all the brands studied.
Written from the abstract read 2026-10-21 via IDEAS and Columbia Business School.
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Jedidi, K., Mela, C. F., & Gupta, S. (1999). Managing Advertising and Promotion for Long-Run Profitability. Marketing Science, 18(1), 1-22. doi:10.1287/mksc.18.1.1