The Power of Inertia: Conservatism in Marketing Resource Allocation

The authors propose a pragmatic methodology to provide management with directional guidance in their marketing resource allocation decisions. The authors report on the estimated market response functions for products from seven different industries. In each industry the most popular marketing vehicle gets the lion’s share of the marketing budget. A number of rationales may explain these allocation decisions, to which the authors add the hypothesis of conservative decision making in marketing. According to this hypothesis, the observed allocation pattern signals a significant overspending on some marketing drivers and underinvestment in alternative marketing vehicles. Marketing managers thereby forego the profitable growth opportunities potentially available from the reallocation of their marketing budgets.