Planning Marketing-Mix Strategies in the Presence of Interactions
Marketing Science, 2005
Companies spend millions of dollars on advertising to boost a brand’s image and simultaneously spend millions of dollars on promotion that many believe calls attention to price and erodes brand equity. We believe this paradoxical situation exists because both advertising and promotion are necessary to compete effectively in dynamic markets. Consequently, brand managers need to account for interactions between marketing activities and interactions among competing brands. By recognizing interaction effects between activities, managers can consider interactivity trade-offs in planning the marketing-mix strategies. On the other hand, by recognizing interactions with competitors, managers can incorporate strategic foresight in their planning, which requires them to look forward and reason backward in making optimal decisions. Looking forward means that each brand manager anticipates how other competing brands are likely to make future decisions, and then by reasoning backward deduces one’s own optimal decisions in response to the best decisions to be made by all other brands. The joint consideration of interaction effects and strategic foresight in planning marketing-mix
strategies is a challenging and unsolved marketing problem, which motivates this paper.