Can Retail Sales Volatility be Curbed Through Marketing Actions?

For many years, marketing managers have used dynamic sales response models to compute expected sales conditional on the available information. These models fail to recognize that the volatility (conditional variance) of sales can vary over time. Moreover, the covolatilities (conditional covariances) between sales and marketing-mix variables can be time varying. Both concepts introduce a new range of strategic and tactical considerations for product and brand managers. Using a multivariate volatility model, we investigate the covolatility of sales and the marketing mix of a focal brand and competing brands in the market. We also examine carryover effects from a volatility perspective. The methodology is applied to six product categories sold by Dominick's Finer Foods. The results reveal valuable implications for marketing managers.