The Impact of Brand Equity and Innovation on the Long-Term Effectiveness of Promotions

Abstract

Although managers often hope to obtain long-term benefits with temporary marketing actions, academic studies imply that their chances are slim. Extant research has implicitly assumed that the brand itself carries no influence over whether marketing promotions have the power to lift sales permanently. Using panel data for seven years from 100 brands across seven product categories, the authors employ a two-stage approach in which long-term promotional effectiveness is first estimated with persistence modeling and then these effectiveness estimates are related to brand equity and new product introductions. By examining a broad range of brands in each category, the authors find that positive sales evolution from promotional efforts is fairly common, especially for small brands. Moreover, the authors find that both permanent and cumulative sales effects from marketing promotions are greater for brands with higher equity and more product introductions, whereas brands with low equity gain greater benefits from product introductions. These results offer new research and managerial insights into the presence and conditions for persistent benefits from marketing promotions.