Firm-based market structure analysis using competitive advertising responses

Abstract

In past literature, consumer-based measures reflecting perceptions or behaviour of consumers have been used for market structure analysis. However, for developing competitive strategies, firms may need to identify market structures based on how their competitors perceive the market and how they behave. In this article, we develop a firm-based measure using advertising reaction data to drive market structure. We then test hypotheses regarding the situations where the firm-based competitive maps converge with those derived from a traditional consumer-based approach. To derive competitive maps, we collected time-series advertising and sales data for 27 SBUs in six consumer-product categories. Survey data were also collected from marketing managers to test the hypotheses. Our investigation suggests that the maps of two approaches are consistent when markets are stable and predictable.