Weathering Tight Economic Times: The Sales Evolution of Consumer Durables Over the Business Cycle

Despite their obvious importance, not much marketing research focuses on how business-cycle fluctuations affect individual companies and/or industries. Often, one only has aggregate information on the state of the national economy, even though cyclical contractions and expansions need not have an equal impact on every industry, nor on all firms in that industry. Using recent time-series developments, we introduce various measures to quantify the extent and nature of business-cycle fluctuations in sales. Specifically, we discuss the concept of cyclical volatility, and derive a dynamic comovement elasticity between the economy as a whole and the cyclical fluctuations in various performance series. To further enhance our understanding of how consumers adjust their purchasing behavior across different phases of the business cycle, two other notable features related, respectively, to the relative size of the peaks and troughs and the rate of change in upward and downward parts of the cycle, are explicitly considered. Of specific interest in this respect are the notion of deepness and steepness asymmetry. We apply these concepts to a broad set (24) of consumer durables, for which we analyze the cyclical sensitivity in their sales evolution. In that way, we (i) derive a novel set of empirical generalizations, and (ii) test different marketing theory-based hypotheses on the underlying drivers of cyclical sensitivity.