Biomedical Engineering Reference
In-Depth Information
Table 23.4
Short-run and long-run elasticities for detailing and combined
direct-to-consumer advertising (DTCA)
Expenditure Period USA Canada
Detailing Short-run 0.0251 0.0208
Long-run 0.1570 0.1297
OME Short-run 0.0406 -
DTCA Short-run 0.0430 0.0367
Long-run 0.0955 0.0815
Note
: Here and in the rest of the tables, OME has no long-run results since
its carryover is zero
Begin by noting that the detailing elasticity is higher in the USA than in Canada.
One underlying reason is that the elasticity estimate depends on the regression coeffi-
cient as well as the spending level. Therefore, while Canada has a higher regression
coefficient (compared to the USA), it can be seen from the descriptive statistics that
the level of spending is considerably lower (than in the USA).
Next, we find that long-run elasticities are larger than the corresponding short-run
elasticities. This is consistent with the positive carryover effects of the corresponding
marketing activities. Essentially, the larger is the carryover coefficient, the larger
will be the long-run elasticity (compared to the short-run estimate). This feature
explains why the long-run elasticity of detailing (with a carryover coefficient of
84 %) is roughly 6 times the short-run elasticity, while the corresponding DTCA
(with a carryover coefficient of 55 %) long-run elasticity is only around twice the
short-run elasticity.
Finally, and most interestingly, we note that the DTCA elasticities are fairly similar
across the two countries.
8
This suggests that spillover has the potential for signifi-
cantly enhancing US pharmaceutical firms' revenues. We must note, however, that
ROI estimate for each of the two countries will depend on the corresponding
revenue base in that country. Therefore, it is possible that ROIs may differ for the
two countries; these are reported below.
23.3.3.3
Return-on-Investment Measures
Our interest here centers on the marginal revenue product for each marketing
investment at the category level. Using brand-level data, Neslin (
2001
) observed that
up to one-half of the ultimate ROI from a marketing investment occurs within the first
8
It is worth noting that our advertising elasticity estimates discussed here are consistent with the
advertising elasticities reported in Sethuraman et al. (
2011
): the average short-term elasticity (over
751 elasticities from 56 studies published between 1960 and 2008) is 0.12; the mean long-term
elasticity is 0.24.
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