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Analytics Overuse in Advertising and Promotion Budget Forecasting
Abstract
Several studies have recently raised a common concern in the field of management, which is the overspending in marketing activities. In this paper, we propose and empirically test that overspending in marketing investments is an unfortunate outcome of information overload, in a sense that managers who confront too many risk informants in their decision environment tend to overinvest in marketing activities due to the overemphasis on the environmental risk. In a longitudinal experiment, where we manipulated the amount of information through marketing analytics, we demonstrate that firms employing simple marketing analytics are less prone to increase their marketing expenditures due to the fear of losing customers, and have a lower expectancy that their competitors will increase their brand-level advertising and promotional expenditures, compared to firms using a combination of simple and complex marketing analytics. Moreover, we demonstrate that firms employing simple marketing analytics keep their overall marketing spending at a lower level, and spend less in brand-level marketing, especially in promotional activities, compared to when using a combination of simple and complex marketing analytics.
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