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EMAC 2019 Annual Conference

Who is in Control? Building Hierarchy in the Dynamics of Marketing Mix Variables

Published: May 28, 2019


Keyvan Dehmamy, University of Groningen; Jaap Wieringa, University of Groningen


Dynamic Hierarchical Factor Models; Retailing; Marketing Mix


Price and promos are common marketing mix (MM) variables, which supermarket-stores use to influence their sales. However, not only own MM determine the sales, but also external factors, including MM of the competitors. When the stores try to influence their own sales, they are countered by the competitors’ reactions. To adjust optimally, the retail managers need to know how the competitors react. This strongly depends at which level of retailing-hierarchy these adjustments are made. In this paper, we use data on lemonades sold in major Dutch-supermarkets, to illustrate that this responsibility strongly depends on the chain and the brand. By using a dynamic hierarchical factor model, we show how to predict the MM, helping managers to know more about competition. The extracted factors at different levels can describe and predict sale variations. IRA’s show MM adjustments in case of unforeseen shocks to the market, identifying MM robust brands and chains.