Biomedical Engineering Reference
In-Depth Information
19.2.2
Findings from Econometric Models
The literature on econometric studies of actual marketing budgeting behavior is
very scarce. In an early attempt, Lilien ( 1979 ) and Lilien and Weinstein ( 1984 )
report on the ADVISOR project that investigates the determinants of industrial mar-
keting budgeting practices in USA and European companies. The ADVISOR data-
base is built on self-reported product budget levels and potential determinants such
as product sales, customer concentration, etc. Regression results (Lilien 1979 ;
Lilien and Weinstein 1984 ) show that the level of sales, the number of users, and the
complexity of the industrial product lead to higher marketing budgets. Older prod-
ucts and those with a higher sales concentration of customers are associated with
lower budgets. As the sample of firms includes pharmaceutical firms, these results
should at least partly reflect their budgeting behavior.
A recent study by Wagner and Fischer ( 2011 ) provides insights into actual bud-
geting behavior of pharmaceutical firms across the five largest European markets.
The authors use quarterly marketing and sales data provided by CEGEDIM and
IMS Health over a period of 12 years. The dataset covers 79 companies that market
518 drugs in four large prescription drug categories and 5 countries. The economet-
ric model formalizes the impact of decision rules on product budgets that derive
from three common budgeting practices: percentage of anticipated sales, profit
maximization (representative of objective-and-task rule), and competitive parity.
The competitive parity rule, for example, assumes that a firm follows key competi-
tors in their budget decisions to raise or decrease the budget. The model also incor-
porates moderating factors, such as the stage in the life cycle and competitive
intensity, to explain under which condition which rule exerts a higher influence on
the budgeting process outcome.
Overall, the results suggest that the percentage-of-sales rule is the most frequently
used rule (>80 % of brand budgets influenced), followed by the competitor-oriented
rule (>50 %), and the profit-oriented rule (ca. 40 %). However, none of the rules
seems to impact the budgeting process exclusively. In addition, the results suggest
that the influence of the percentage-of-sales rule is stronger after patent expiry and
at later stages of the life cycle. Profit maximization has more relevance in less com-
petitive markets where firms can exert a greater monopolistic power. Competitive
parity seems to play a greater role for drugs that are still under patent protection,
probably in order to keep the market share required for harvesting the product.
19.3
Modeling Demand for Pharmaceuticals
19.3.1
Overview of Model Approaches
Expenditure response models attempt to establish a relationship between a demand
variable and a spending variable. Demand is usually measured in terms of brand
unit sales or market share, but it may also refer to the demand of other stakeholders
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