Sony Eurasia Gets Higher Returns for BTL Dealer Efforts Than for ATL Advertising

Sony Eurasia gets higher returns for BTL dealer efforts than for ATL advertising Based on below analysis Ozyegin University Professor Koen Pauwels, Sony Eurasia is recommended to spend much more on below-the –line (BTL) push marketing efforts than on ATL push marketing efforts. The reason is that Sony already has high brand equity among Turkish consumers, many of who say they prefer Sony, but then end up buying another brand at retail. Sony’s efforts to bridge this ‘last meter’ are clearly paying off in the market

Sony Eurasia Data and Nobel-Prize winning Vector Autoregression (VAR) model

We thank Sony Eurasia for providing us with time series data and a breakdown of their activities in above the line (ATL) advertising and below the line (BTL) dealer efforts across categories across 7 product categories. Our data are monthly 2002-2009. We allow each of these marketing actions to affect sales now and in the future in the flexible model (Vector Autoregression) for which Chris Sims (1980) is obtaining the 2011 Nobel Prize in Economics. Our model specification includes sales, ATL and BTL spending as endogenous variables, which means each is explained by the model. For instance, higher ATL spending may stimulate sales, which encourages the company to spend more on BTL, which in turn gets dealers to ask for more ATL spending. As exogenous variables, we control for seasonality with dummy variables for each month (using January as a benchmark).

Results: Sony obtains higher long-term elasticity for below-the-line marketing efforts Similar to Siliverline (see Report), we obtain the over-time effects for Sony’s 7 products categories. For space reasons, we focus on the three main categories in terms of Sony sales: camcorders, TV (VPE) and in-car entertainment (eVA) in figures 1-3. All effects are on Sony’s sales growth, as sales is evolving in each category except Walkman. Figure 1: Impulse response of Sony’s Camcorder sales growth to ATL and BTL ads

Response of CAMSAL to Generalized One S.D. Innovations

0 2 4 6 8 10 12 14 16 18 20

CAMPULL CAMPUSH

Figure 2: Impulse response of Sony’s TV (VPE) sales growth to ATL and BTL ads

Response of VPESAL to Generalized One S.D. Innovations

-10 2 4 6 8 10 12 14 16 18 20

VPEPULL VPEPUSH Figure 3: Impulse response of Sony’s eVA (in-car) sales growth to ATL and BTL ads

Response of EVASAL to Generalized One S.D. Innovations

-5 2 4 6 8 10 12 14 16 18 20

EVAPULL EVAPUSH

The over-time effect pattern across Sony categories shows several differences, but also striking similarities. First, above-the-line (ATL) pull marketing efforts pay off early, typically before below-the-line (BTL) push efforts (camcorders and in-car entertainment). In contrast, the long-run effect is higher for BTL push efforts; taking over the ATL effect by month 3 (in- car, TV) or month 5 (camcorders). Second, ATL pull marketing does share the month 2 wear- in with Silverline for TV and in-car entertainment, but not for camcorders, where dominant Sony obtains an immediate sales boost. Turning to the short-term and long-term elasticity of sales to marketing actions, Table 1 summarizes our findings across the seven categories.

Table 1: Short-Term & Long-Term Sales Elasticities of ATL pull-BTL push marketing

Product (% sales-% profits) Short-term ATL Short-term BTL Long-term ATL Long-term BTL pull marketing pull marketing pull marketing pull marketing Camcorders (25%-29%) 0.007 1.113 0.029 9.457

VPE-TVOE (24%- 0 1.059 0.003 2.331 21%) PAE (5%-6%) 0.007 1.639 0.044 9.902

HFE (6%-5%) 0 1.089 0.051 1.920 eVA (4%-5%) 0.004 0 0.008 10.305

Walkman (3%-4%) 0.002 0 0.010 3.887

HVE (3%-2%) 0 0 0.166 5.011 How do these numbers compare with empirical generalizations in mature markets? Interestingly, all ATL pull marketing elasticities range between 0.003 and 0.051, which is close to the average advertising elasticities reported by Srinivasan et al. (2010) for France (short-term ad elasticity of 0.015, long-term advertising elasticity of 0.037), and by e.g. Hanssens et al. (2001); Tellis and Ambler (2007) for the US. Moreover, the BTL push elasticities in VPE, HFE and Walkman are close to distribution effort elasticities of 1.868 (Lambin 1976) and of 0.978 (short-term) and 2.740 (long-term) in Srinivasan et al. (2008). However, BTL push elasticities are twice as high (around 5) in HVE and four times as high (around 10) in Camcorders, PAE and EVE. Given the above numbers, Sony Eurasia is recommended to spend substantially on below-the –line (BTL) push marketing efforts than on ATL push marketing efforts. Thus, consistent with our hypotheses, we find that the higher equity brand has more to gain from BTL push marketing efforts but the lower equity brand (Silverline) has more to gain from ATL pull marketing efforts.

Can your company benefit from such analysis?

For more information, please contact [email protected] .