Recurrent Marketing Decisions: Decision Complexity,Decision Focus,and Firm Performance

In this paper we examine the nature of the decision-making process for recurrent marketing decisions and its effects on firm performance. A conceptual model of recurrent decision-making in a competitive environment is developed and used as a framework for analyzing 96 tactical decisions made by 35 management groups in the last three periods of a management simulation. The decisions were based entirely on a set of decision rules developed by the management groups. The decision rules were coded for whether they were internally or externally focused and how complex their decision process was. These two factors were then used to predict firm performance. There are a number of important results. The greater the uncertainty in the link between a decision variable and its outcome, i) the more likely managers are to prespecify the value of the decision variable rather than construct a decision rule, ii) the less complex the decision rules that are constructed, and iii) the greater the proportion of internally-focused decision rules. In addition, the focus of a decision rule, but not the complexity of the process—independent of the focus—is positively related to performance with firms that focus on both internal and external factors doing best.