Practice Prize Paper—Marketing-Mix Recommendations to Manage Value Growth at P&G Asia-Pacific

Abstract

P rocter & Gamble (P&G) Asia-Pacific is interested in managing value growth. Only after fully understanding the true effects of the marketing-mix variables can P&G managers make strategic decisions answering questions such as the following: (1) Are the P&G brands in the detergent market inelastic or elastic with respect to price? How has the price elasticity changed over time? Can P&G increase the price of its brands to gain value growth? (2) What are the price, distribution, and sizing combinations needed to achieve the desirable value growth? (3) How can P&G gain market share from its competitors without cannibalizing its own brands? P&G Asia-Pacific approached us to develop a value growth framework to answer these questions. To generate the answers for the above questions, we develop a three-step weighted random coefficient estimator that captures the heterogeneity across cross sections (different stock-keeping units and states) and the endogeneity of distribution. Based on the parameter estimates, we provide strategic recommendations to P&G for a field test to validate our suggestions. We developed a simulator for P&G managers so that they can generate appropriate marketing-mix strategies for achieving the desired value growth. As a result, P&G gained over $39 million in value growth over a one-year period by implementing the recommendations from our modeling approach.

First-Mover Advantage Through Distribution: A Decomposition Approach

“…Bucklin, Siddarth, and Silva-Risso (2008) report the positive e¤ect of distribution intensity on a consumer's choice of a new car from eight midsize premium sedan models. Kumar, Fan, Gulati, and Venkat (2009) …nd the distribution level has a positive in ‡uence on sales of P&G's 11 brands at the SKU level. By contrast, the empirical evidence of the e¤ect of distribution on sales of brands at the aggregated level, such as the retailer chain, has received scant attention.…”

“…1 At the same time, the literature on the e¤ects of marketing mix on performance provides empirical evidence that increased distribution has a positive e¤ect on sales (see, e.g., Ataman, van Heerde, and Mela 2010;Kumar, Fan, Gulati, and Venkat 2009;Reibstein and Farris 1995). Of course, if a product or service is less accessible because of increased search costs or transportation costs, people might be less likely to purchase it.…”

“…Despite the extant empirical literature on the …rst-mover advantage (see, e.g., Table 1 in Lieberman and Montgomery 1998) and the literature on the relationship between market shares and distribution (e.g., Reibstein and Farris 1995;Bucklin, Siddarth, and Silva-Risso 2008;Kumar, Fan, Gulati, and Venkat 2009;Ataman, van Heerde, and Mela 2010), scant evidence assesses the relative importance of an outlet's sales performance and distribution as mechanisms for …rst-mover advantage. This paper contributes to the marketing literature by synthesizing the existing work on …rst-mover advantage and on the relationship between market shares and distribution through a simple decomposition of market shares.…”

Establishing Profitable Customer Loyalty for Multinational Companies in the Emerging Economies: A Conceptual Framework

“…In such economies, customization has been purely generic and broad-based as dictated by the norms and culture of the economy. Kumar et al (2009) provide the only evidence available regarding customization in the emerging markets, using data analytics to demonstrate how fast-moving consumer goods giants such as P&G can increase profitability there. Because this is an exception for an emerging market, their analyses are limited to products and not services.…”

Why the Dynamics of Competition Matter for Category Profitability

“…At least two main factors influence COMPTN(jt, it): inter-SKU attribute similarity and marketing-mix effects. Let SIMIL(i, j) denote the degree of attribute similarity between i and j, and let MMIX it denote the endogeneity-corrected marketing-mix activity of SKU i in period t. 1 Although MMIX effects can be contemporaneous (e.g., Eliashberg and Chatterjee 1985;Kumar et al 2009;Kannan and Yim 2001), consumer behavior such as stockpiling, consumption, and purchase postponement (e.g., Sun, Neslin, and Srinivasan 2003) may result in intertemporal MMIX effects. Let k periods of MMIX lags-denoted by MMIX i,t-1 , MMIX i,t-2 , ..., MMIX i,t-k -affect j's demand.…”