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Datta, Hannes; Van Heerde, H.J.; Dekimpe, Marnik; Steenkamp, J.E.B.M Tilburg University Cross-National Differences in Market Response: Line-Length, Price, and Distribution Elasticities in Fourteen Indo-Pacific Rim Economies Datta, Hannes; van Heerde, H.J.; Dekimpe, Marnik; Steenkamp, J.E.B.M. Publication date: 2019 Document Version Early version, also known as pre-print Link to publication in Tilburg University Research Portal Citation for published version (APA): Datta, H., van Heerde, H. J., Dekimpe, M., & Steenkamp, J. E. B. M. (2019). Cross-National Differences in Market Response: Line-Length, Price, and Distribution Elasticities in Fourteen Indo-Pacific Rim Economies. General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal Take down policy If you believe that this document breaches copyright please contact us providing details, and we will remove access to the work immediately and investigate your claim. Download date: 02. okt. 2021 Universality or Differences in Marketing Elasticities in Emerging versus Developed Markets? The Moderating Role of Brand Equity Hannes Datta Harald J. van Heerde Marnik G. Dekimpe Jan-Benedict E.M. Steenkamp This version: September 13, 2019 Hannes Datta is Associate Professor of Marketing at Tilburg University (e-mail: [email protected]). Harald J. van Heerde is SHARP Research Professor of Marketing at UNSW Business School, Sydney, and CenTER Fellow at Tilburg University, Department of Marketing (e-mail: [email protected]). Marnik G. Dekimpe is Research Professor of Marketing & Head of the Marketing Department, Tilburg University, and Professor of Marketing, KU Leuven (e-mail: [email protected]). Jan-Benedict E.M. Steenkamp is C. Knox Massey Distinguished Professor of Marketing, University of North Carolina at Chapel Hill (e-mail: [email protected]). The authors are indebted to GfK Singapore for making the data available, and thank Yuri Peers as well as participants at the 2018 ANZMAC Conference, the 2019 Research Camp at the University of Hamburg, the 2019 INFORMS Marketing Science conference, and seminar participants at the University of Mannheim for valuable feedback. 1 Universality or Differences in Marketing Elasticities in Emerging versus Developed Markets? The Moderating Role of Brand Equity Consumption in emerging markets is growing much faster than in developed markets. Accordingly, many global brand manufacturers venture into emerging markets, where they battle vigorously for market share. At the same time, emerging-market brands increasingly expand to more developed markets. While most firms have considerable expertise competing in similar markets, they lack insights on how consumers respond to marketing activities in economically dissimilar markets. Therefore, this paper quantifies the market-share elasticities of (i) three key marketing-mix instruments (price, distribution and line length), for (ii) 1,600+ international and domestic brands, across (iii) 14 durable categories (covering more recent categories like smartphones and mature ones like refrigerators), in (iv) 7 emerging and 7 developed markets from Asia and Australasia, for (v) up to 11 years. The findings suggest that differences in marketing elasticities between emerging and developed markets depend not only on the type of marketing variable (strongest difference for distribution), but also on brand equity (which affects elasticities more favorably in emerging markets than in developed markets). The paper discusses implications for marketing theory and practice. Keywords: Marketing-Mix Elasticities, Emerging Markets, Econometrics, Empirical Generalizations, Product, Pricing, Sales Promotions, Retailing. 2 Many U.S. and other firms generate a significant and growing share of their revenues overseas. In the earlier stages of the internationalization of the marketplace, firms expanded primarily to other developed markets (DMs). After all, even a mere fifteen years ago, DMs accounted for 81% of global GDP. The situation has changed dramatically since then; today, emerging markets (EMs) already account for 37% of global GDP,1 a number that many believe will grow further in the coming years. Firms require knowledge on these highly dissimilar markets, with characteristics many were only modestly aware of just two decades ago. A crucial element in developing a marketing strategy for any given market is knowledge of its market-response parameters, i.e., how consumers in a given country respond to the brands’ marketing mix (Farley and Lehmann 1994). One could argue that firms could base their strategy upon a wealth of previous research, much of which is summarized in various meta-analyses (e.g., Bijmolt, Van Heerde, and Pieters 2005) and recently compiled in Hanssens (2015). While this body of research is indeed substantial and important, nearly all insights are based on DMs. To date, the marketing literature gives conflicting conceptual perspectives and very little empirical guidance regarding market-response effects in EMs. In a parallel development, an increasing number of EM brands have started to break out of their traditional market boundaries to also compete in more developed markets (Kumar and Steenkamp 2013). In both instances, managers have considerably more experience competing in their familiar level of economic development, and wonder to what extent they can expect a similar, or rather a very different, level of responsiveness to their marketing activities when operating in a substantially more (or less) developed economic environment. 1 Based on statistics provided by the World Bank (2019). 3 On the one hand, the theory of global marketing standardization (Yip 2003) and the emergence of global consumer culture (Alden, Steenkamp, and Batra 1999) support the idea that global markets have comparable response parameters. On the other hand, clear differences in languages, cultures, values, income per capita and its distribution, demographics, and consumption levels between DMs and EMs let managers presume there are also large cross- national differences in marketing effectiveness (Farley and Lehmann 1994, Burgess and Steenkamp 2006). Moreover, few studies offer a direct empirical comparison of marketing elasticities between EMs and DMs.2 A key factor that has been overlooked in the debate on whether marketing-mix responsiveness differs between EMs and DMs is brand equity. This is unfortunate given that the brand is the linchpin around which the firm’s marketing efforts are organized, while brand equity is defined as the differential effect brand knowledge has on consumer response to the marketing of the brand (Keller 1993, p. 2; emphasis added). Regarding the role of brand equity in DMs versus EMs, conflicting conceptual arguments have been put forward. Sheth (2011) argues that the notion of brand equity could be at odds with the realities of emerging markets, given their great number of unbranded products. On the other hand, Roberts et al. (2015) argue that the consumption of high-equity brands is more aspirational in EMs than in DMs. An implication of this line of argumentation is that in EMs, brand equity is expected to have more favorable effects on marketing elasticities (e.g., stronger response to price discounts or expansion of line length for high-equity brands) than in DMs. In this paper, we study a broad cross-section of branded 2 A notable exception is Bahadir, Bharadwaj and Srivastava (2015), who studied four rather similar beverage categories (regular soft drinks, diet soft drinks, energy drinks and juices). It is unclear, however, to what extent any of the observed differences are idiosyncratic to this particular subset of CPG categories. 4 products and develop/test the argument that brand equity will play a different role for brands depending on the country’s development level. In sum, this paper addresses the following two research questions (RQ): RQ1 Are there systematic differences in marketing-mix elasticities (price, distribution, line length) between DMs and EMs, and if so – what is their magnitude? RQ2 Does brand equity have more favorable effects on marketing-mix elasticities in EMs, compared to DMs? A major barrier hitherto to study such questions is the lack of suitable data, especially for emerging markets. In order to make a proper comparison, the data need, ideally, be collected in a uniform way and cover the same set of products across the same time period, and span multiple countries, across multiple and diverse product categories and brands, to ensure empirical generalizability. We are in the fortunate position to have access to a unique data set spanning seven DMs (Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea, and Taiwan) and seven EMs (China, India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam), jointly representing nearly half of the world’s population. The global market research agency GfK provided monthly national data on sales and marketing activities for brands in 14 electronics and appliance categories over a time period of up to 11 years
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