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Businesses rely on solid marketing strategies to boost salesyet the tools used to evaluate these strategies often provide misleading results, leaving managers with the inability to accurately measure how they can get the best bang for their marketing buck.
"Companies really need to pay attention to the effectiveness of their marketing instruments"
Thomas J. Steenburgh, an associate professor in the Marketing Unit at Harvard Business School, has developed a new analytical tool that more accurately measures the effectiveness of various marketing efforts. He created the model with Qiang Liu, an assistant professor of marketing at Purdue University, and Sachin Gupta, the Henrietta Johnson Louis Professor of Management and professor of marketing at Cornell University. Steenburgh believes that the model could help brand managers determine which marketing strategies work best to invest in. "Companies really need to pay attention to the effectiveness of their marketing instruments," Steenburgh says. "They need to look at whether they're creating new customers or whether they're just drawing customers away from competitors. It's a fundamental question in
expected detailing to generate greater demand for the products than either direct-to-consumer advertising or meetings and events, the traditional models would not allow them to discover this because of the IPS. When they applied their FSL model, however, the results provided much greater detail about the potential effects of different marketing investments. For example, the model predicted that sales gains from DTCA and M&E would come primarily through category expansion (87.4 percent and 70.2 percent, respectively), whereas gains from detailing would come at the expense of competing drugs (84 percent). By contrast, the random coefficient logit model predicted that gains from DTCA, M&E, and detailing would come largely from competing drugs. "The FSL model is very useful if you want to predict consumer demand," Steenburgh says. "This model gives you a better way to do that."
Figuring in payback
With results that provide a better analysis of how different marketing instruments work, brand managers can now decide how to best invest their marketing dollars. For example, if a brand manager is concerned about retaliation from competitors, the best decision may be to limit investment in detailing and instead put more emphasis on direct-to-consumer advertising or on sponsoring meetings and events, both of which are more likely to expand the category. Steenburgh notes that future research is needed to find alternative models that overcome the IPS, and he hopes that the FSL model will be applied in other studies that examine the effectiveness of marketing instruments. "It would be interesting to apply the FSL model in a lot of other situations to see which
ones expand the pie and which ones threaten other actions," he says.