Mastering the Mix: Do Advertising, Promotion, and Sales Force Activities Lead to Differentiation?

Abstract

The authors consider the effects of three marketing communication activities on nonproduct based differentiation. Specifically, they examine whether advertising, sales force, and promotion activities increase a firm's ability to differentiate and thus shield itself from future price competition. They suggest that own-price elasticity represents a measure of differentiation and examine the effects of marketing communication activities on own-price elasticities for a large number of consumer (durable and nondurable) businesses. They make a series of predictions about future differentiation outcomes based on the likely uniqueness of the communication message. The obtained results are compatible with their basic premise that, by providing unique and positive messages, a firm can insulate itself from future price competition, as witnessed by less negative future price elasticities. Conversely, results indicate that nonunique messages can decrease future differentiation, for example, price promotions for firms that price above the industry average lead to more negative future price elasticities.