Cointegration analysis of brand and category sales: Stationarity and long-run equilibrium in market shares

Abstract

The present study uses modern time series methodology to understand long-run equilibrium in markets and provides additional evidence of the frequent existence of stationary market shares for frequently purchased consumer products. Dekimpe and Hanssens, Marketing Science 1995; 14(2):G109–121 using a database of over 400 prior studies, found that 78 per cent of the market share series they studied were stationary, but that 68 per cent of the sales series were evolving. Our findings reconcile these results. A major contribution of this paper is its demonstration that the prior empirical evidence that a majority of sales series is in evolution is consistent with stationary market shares, if brand sales and category sales are cointegrated. To the extent that competitive activities have an effect on market share, an implication of our findings is that these activities may, in general, only have a temporary effect on market share. Finally, we distinguish, from a strategic perspective, between sales and share response at the primary-demand level (category sales), selective-demand level (brand sales) and relative-position level (market share) and identify strategic scenarios depending upon their stable/evolving nature. Copyright © 2000 John Wiley & Sons, Ltd.