Does competitive entry structurally change key marketing metrics?

Marcel Kornelis, Marnik G. Dekimpe, Peter Leeflang

Research output: Contribution to journalArticle

Abstract

To what extent does competitive entry create a structural change in key marketing metrics? New players may just be a temporal nuisance to incumbents, but could also fundamentally change the latter's performance evolution, or induce them to permanently alter their spending levels and/or pricing decisions. Similarly, the addition of a new marketing channel could permanently shift shopping preferences, or could just create a short-lived migration from existing channels. The steady-state impact of a given entry or channel addition on various marketing metrics is intrinsically an empirical issue for which we need an appropriate testing procedure.

In this study, we introduce a testing sequence that allows for the endogenous determination of potential change (break) locations, thereby accounting for lead and/or lagged effects of the introduction of interest. By not restricting the number of potential breaks to one (as is commonly done in the marketing literature), we quantify the impact of the new entrant(s) while controlling for other events that may have taken place in the market. We illustrate the methodology in the context of the Dutch television advertising market, which was characterized by the entry of several late movers. We find that the steady-state growth of private incumbents' revenues was slowed by the quasi-simultaneous entry of three new players. Contrary to industry observers' expectations, such a slowdown was not experienced in the related markets of print and radio advertising.
Original languageEnglish
Pages (from-to)173-182
Number of pages10
JournalInternational Journal of Research in Marketing
Volume25
Issue number3
DOIs
Publication statusPublished - Sep 2008

Keywords

  • multiple breaks
  • structural-break time-series analysis
  • unknown timing
  • late-mover entry
  • marketing metrics

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