bluuebunny/crossref_metadata_2025 huggingface dataset:
A Two-State Model of Purchase Incidence and Brand Choice
Authors: Bucklin Randolph E. , Lattin James M.
Published: October 2008

The authors develop and test a probabilistic model of purchase incidence and brand choice for frequently purchased consumer products. The model incorporates two ways of shopping in a category. Shoppers who have planned their purchasing (made a decision before entering the store) do not process in-store information and show no response to point-of-purchase promotions. Consumers who have not planned their purchasing in a category (deciding at the point of purchase) may process in-store information and may be strongly influenced by promotions. The two modes of information processing are called decision states and are labelled planned and opportunistic, respectively. The two-state model is calibrated on IRI scanner purchase records for saltine crackers. The model yields a significantly better fit than a one-state nested logit model and provides new insights into the relationship between shopping behavior and consumer purchase response.
Modeling and Testing Structured Markets: A Nested Logit Approach
Authors: Kannan P. K. , Wright Gordon P.
Published: October 2008

A structured market for a product category is a pair (s, As) consisting of a set of consumers s who have the same decision tree, As, which reflects the process by which the consumers in s evaluate product features when making choices. Using a nested logit approach: (1) we present methods to test for the existence of hypothesized multiple structured markets, and (2) we present empirically determined insights on how brands compete within each structured market through the inclusion of marketing mix variables in our model.

A successful empirical application of our methods using a panel data set of coffee purchases obtained from Selling Area Marketing Inc. confirms the existence of at least two distinct structured markets in the ground coffee market. The type-primary market is a segment of “switchers”, highly responsive to changes in market mix variables whereas the brand-primary market is a “loyal” segment, relatively unresponsive to marketing programs.
Identifying Most Influential Observations in Factor Analysis
Authors: Chatterjee Sangit , Jamieson Linda , Wiseman Frederick
Published: October 2008

At the mathematical level, a factor or principal component of a factor analysis is simply a linear combination of variables under some constraints. Therefore, as in regression analysis, there are conditions under which individual or joint observations can be influential in the sense that their presence or absence significantly influences the obtained values of the estimated factor loadings. The nature of these effects as well as potential effects due to “gross errors” in the data set should be investigated in order to determine which observations, if any, need to be analyzed separately or excluded entirely. The purpose of this paper is (1) to propose a new technique for identifying influential observations and observations containing “gross errors” and (2) to discuss situations under which each is likely to significantly alter the results of a factor analysis.
Market Incumbency and Technological Inertia
Authors: Ghemawat Pankaj
Published: October 2008

This paper uses a case study and a simple mathematical model to study the link between the incumbency and incentives to innovate and introduce drastically new products. It identifies the conditions under which fears of self-cannibalization are particularly likely to lead incumbents to soft-pedal such innovations.
A Taxonomy of Consumer Purchase Strategies in a Promotion Intensive Environment
Authors: Currim Imran S. , Schneider Linda G.
Published: October 2008

This paper proposes a taxonomy of consumer purchase strategies based on household decisions about which brand to purchase, how much, and when to purchase in a promotion intensive environment. We infer decision rules at the household level from supermarket scanner panel data and then cluster the inferred choice routes in order to discover the major purchasing strategies used in our population of interest. Subsequently, we test for the distribution of these purchase strategies in our customer population. Results add to our knowledge of consumer behavior in response to promotions.
Quality Perceptions and Asymmetric Switching Between Brands
Authors: Allenby Greg M. , Rossi Peter E.
Published: October 2008

Rotating indifference curves are used to induce an income effect that favors superior brands at the expense of inferior brands in a discrete choice model. When calibrated on scanner panel data, the model yields an objective measure of brand quality which is related to the rate of rotation. The model also leads to asymmetric responses to price promotions where switching up to high quality brands is more likely than switching down. The model is capable of nesting the standard logit model, and is similar to a nested logit model when there exists clusters of brands of like quality. The model is used to explore a product line pricing decision where profits are maximized subject to the constraint that consumer utility is maintained.
Cognitive Geometry: An Analysis of Structure Underlying Representations of Similarity
Authors: Glazer Rashi , Nakamoto Kent
Published: October 2008

This paper discusses the formal analysis of the structure underlying distance-based representations of consumer similarity judgments. Four models common in the marketing and psychological literature are examined—Euclidean and city-block spaces and ultrametric and additive trees. The analysis uses the distinction between “algebraic” and “geometric” structures as the basis for a unifying framework within which the four representations are compared and contrasted. The framework is then used to understand (1) the conditions under which model structure is theoretically revealing of the cognitive structure behind consumer behavior and (2) the degree to which similarity judgments and the resultant distance patterns are diagnostic of the appropriateness of a particular model. An important implication of the analysis is that there is a basic measurement indeterminacy associated with distance patterns, so that similarity data may not always reveal which is the “true” model in a given application. The consequences arising from this indeterminacy for the problem of model selection in marketing are illustrated with an empirical experiment designed to test the implications of the formal analysis in practical settings.
Brand Loyalty and Market Equilibrium
Authors: Wernerfelt Birger
Published: October 2008

Two concepts of brand loyalty are defined, “inertial” brand loyalty resulting from time lags in awareness, and “cost-based” brand loyalty resulting from intertemporal utility effects. Their market level implications are formally derived in a continuous time model. It is found that inertial brand loyalty leads to equilibria with price dispersion, while cost-based brand loyalty also may allow single price equilibria. In all cases, as brand loyalty vanishes, so does the difference between the average trading price and the price which obtains with no brand loyalty. Consistent with empirical results, the theory predicts that the relationship between market share and performance is positive in cross-sectional studies, but flat in time-series studies. The theory is also consistent with the view that market share is an asset in itself. After developing the theory, several strategic implications are drawn. In the end, some questions for further theoretical and empirical research are raised.
Multiple Source Procurement Competitions
Authors: Seshadri Sudhindra , Chatterjee Kalyan , Lilien Gary L.
Published: October 2008

Relationships between buying and selling organizations in business markets are varied and complex. One important relationship is procurement, or the type of alliance that buyers form with sellers to fulfill their purchasing needs. Multiple sourcing is often proposed to prevent a variety of procurement problems. We develop a bidding model to investigate the effect of multiple sourcing on competitive behavior prior to supplier selection.

The model treats the number of bidders (and the decision to bid) endogenously. This distinctive feature allows us to show that the distribution of the number of bids is not independent of the competition type. Most previous models have not considered this question at all. Although multiple sourcing does increase participation in a bidding competition, we show that it can lead to strategic pre-award price increases that can mitigate the effects of the advantages stressed by most previous analyses of post-award supplier management.
A New Multidimensional Scaling Methodology for the Analysis of Asymmetric Proximity Data in Marketing Research
Authors: Desarbo Wayne S. , Manrai Ajay K.
Published: October 2008

This paper presents a new multidimensional scaling (MDS) methodology which operationalizes the Krumhansl (1978) distance-density model for the analysis of asymmetric proximity data. In Krumhansl's conceptualization, the symmetric Euclidean interbrand distances typically associated with the traditional MDS model are augmented by the spatial density around the brands in the derived space. This modification allows the distance-density model to accommodate many of the empirically observed violations of the metric axioms (such as asymmetry). An operationalization of the distance-density model is particularly attractive to marketers who often work with asymmetric brand switching data to investigate market structure and competition. We describe this new MDS procedure which is sufficiently flexible to fit a number of competing hypotheses of proximity. The algorithm employed for estimation is technically presented together with various program options. An analysis of an asymmetric brand switching matrix for automobiles is presented to illustrate the methodology. The results of this analysis are also compared with the solutions obtained from several of the currently available procedures for handling asymmetric proximity data. Finally, technical extensions to three-way analyses, hybrid models, etc., are discussed.
Brand Loyalty and Marketing Strategy: An Application to Home Appliances
Authors: Bayus Barry L.
Published: October 2008

In the academic literature, the modelling of brand choice and switching behavior has a long history for frequently purchased packaged goods. Comparable efforts with consumer durable goods, however, are generally absent. This paper presents an application of the brand switching model proposed by Colombo and Morrison (1989) to a set of four major home appliances. Appliance brand loyalty, however, is shown to be a function of the timing of replacements, a factor that has not entered into the modelling of packed goods. As a result, the brand switching matrices are analyzed over the replacement cycle. This application illustrates how a brand switching analysis can be used to assess the relative competitive position of a firm in terms of the primary customer sources that a brand attracts.
A Choice-Based Approach to the Diffusion of a Service: Forecasting Fax Penetration by Market Segments
Authors: Weerahandi S. , Dalal S. R.
Published: October 2008

Motivated by poor performance of standard estimation methods in our application, the problem of modeling the diffusion of a new service (or a product) is considered without the assumption of a homogeneous population. The model consists of a two-stage procedure where customers receive purchase occasions according to a conventional diffusion model and at each purchase occasion they buy according to a binary choice model. This approach permits explicit incorporation of individual customer demographics and product attributes, whence one can study changes in diffusion as a function of changes in product attributes, prices, advertising, and customer demographics. The model has provided excellent results in a number of applications including the one on fax penetration reported here. In our applications this approach has been useful in market segmentation, studying the effect of marketing strategies, and in evaluating the effects of new service features. A limited validation is carried out to judge the forecasting performance of the model used in the fax example. A simulation study is carried out to compare the proposed solution with the result obtained by fitting the Bass model to a set of market segments separately. The simulation indicates that the proposed approach substantially improves over the aggregate fitting.
Assessing the Bias of Preference, Detection, and Identification Measures of Discrimination Ability in Product Design
Authors: Buchanan Bruce , Henderson Pamela W.
Published: October 2008

Researchers often test consumers' abilities to discriminate between two product formulations. Such tests are used in new product development, quality control, and competitive assessment. This paper investigates three paired comparison taste tests, each requiring a different judgment. These are: preference (“Which of these two do you prefer?”), identification (“Which one of these two is Brand X?”) and detection (“Are these two products the same or different?”). Each task has biases that may influence the level of measured discrimination ability. To our knowledge, this is the first empirical study to compare subject discrimination ability as measured by all three tasks. Additionally, we test two scales of subject confidence ratings and discuss implications for product testing.
Recall, Recognition and the Measurement of Memory for Print Advertisements: A Reassessment
Authors: Finn Adam
Published: October 2008

Application of the two-step approach to structural equation modeling to the PARM data studied by Bagozzi and Silk (1983) results in quite different conclusions as to the psychometric properties of recall and recognition scores. The data they analyzed are more consistent with a simple, alternative measurement model, which has different implications for the dimensionality questions Bagozzi and Silk raised. After controlling for random error, recall and recognition scores for print ads are highly correlated and yet discriminable. So, while recall and recognition have considerable common variance, the unidimensionality hypothesis is rejected. Either recall or recognition (or both) contains a significant amount of specific variance. Taking reader interest scores into account does not change the conclusion; reader interest scores are best accounted for as a lower reliability indicator of recognition.
An Application of a Product Positioning Model to Pharmaceutical Products
Authors: Green Paul E. , Krieger Abba M.
Published: October 2008

This paper describes a case application of SIMOPT, a product positioning model and decision support system.
Dynamic Effects of the Order of Entry on Market Share, Trial Penetration, and Repeat Purchases for Frequently Purchased Consumer Goods
Authors: Kalyanaram Gurumurthy , Urban Glen L.
Published: October 2008

A time series cross-sectional analysis of 18 successful later entrants in 8 categories of consumer packaged goods over the period from October 1983 to January 1988 confirms previous empirical findings that, after correcting for differences in marketing effort, later entrants suffer a long-term market share disadvantage. New evidence of the penalties associated with later entry are found in statistical estimation of models of cumulative trial, first repeat, and subsequent repeat purchasing. Significantly lower asymptotic levels are found in both trial and repeat behavior. However based on this data, the rate of approach of later entrants to their lower asymptotic performance measures is either equal to or faster than early entrants and provides evidence of a compensating partial effect accrued by later entrants.
The Normative Impact of Consumer Price Expectations for Multiple Brands on Consumer Purchase Behavior
Authors: Krishna Aradhna
Published: October 2008

Empirical research indicates that some consumers form price expectations which may impact their purchase behavior. While literature in operations research has built purchase policy models incorporating uncertain price expectations, these models have been built for commodities. Consumers face an environment with multiple brands. In this paper, we develop a model that incorporates consumer preferences and price expectations for multiple brands as determinants of normative consumer purchase behavior. The model demonstrates how commodity purchase policy models recognizing price uncertainty can be adapted to the study of multi-brand markets. The model is used to analyze the normative impact of changes in price promotion policies and holding costs on individual purchase behavior. It is also used in a Monte-Carlo market simulation that illustrates some scenarios where a post-promotion dip is more or less evident, and provides an explanation for the nonexistent post-promotion dip.
Price Sensitivity and Television Advertising Exposures: Some Empirical Findings
Authors: Kanetkar Vinay , Weinberg Charles B. , Weiss Doyle L.
Published: October 2008

Empirical research (as well as theoretical reasoning) has led to contradictory findings with regard to whether increases in brand advertising activities lead to increases or decreases in consumer price sensitivity. Lack of data to measure the exposure of individual households to advertisements and to capture competitive activities has been an important limitation to date. This study, using single source data for a midwestern US market, finds that increased advertising exposures are associated with increases in a household's brand choice price sensitivity for two frequently purchased consumer products. However, under high levels of advertising exposure, it is possible for a household's brand choice price sensitivity to decrease.
The Voice of the Customer
Authors: Griffin Abbie , Hauser John R.
Published: October 2008

In recent years, many U.S. and Japanese firms have adopted Quality Function Deployment (QFD). QFD is a total-quality-management process in which the “voice of the customer” is deployed throughout the R&D, engineering, and manufacturing stages of product development. For example, in the first “house” of QFD, customer needs are linked to design attributes thus encouraging the joint consideration of marketing issues and engineering issues. This paper focuses on the “Voice-of-the-Customer” component of QFD, that is, the tasks of identifying customer needs, structuring customer needs, and providing priorities for customer needs.

In the identification stage, we address the questions of (1) how many customers need be interviewed, (2) how many analysts need to read the transcripts, (3) how many customer needs do we miss, and (4) are focus groups or one-on-one interviews superior? In the structuring stage the customer needs are arrayed into a hierarchy of primary, secondary, and tertiary needs. We compare group consensus (affinity) charts, a technique which accounts for most industry applications, with a technique based on customer-sort data. In the stage which provides priorities we present new data in which product concepts were created by product-development experts such that each concept stressed the fulfillment of one primary customer need. Customer interest in and preference for these concepts are compared to measured and estimated importances. We also address the question of whether frequency of mention can be used as a surrogate for importance. Finally, we examine the stated goal of QFD, customer satisfaction. Our data demonstrate a self-selection bias in satisfaction measures that are used commonly for QFD and for corporate incentive programs.

We close with a brief application to illustrate how a product-development team used the voice of the customer to create a successful new product.
Composite Dependent Variables and the Market Share Effect
Authors: Jacobson Robert , Aaker David A.
Published: October 2008

Farris, Parry and Ailawadi (1992; hereafter denoted FPA) demonstrate that bias can arise in a regression involving a composite dependent variable where a subset of components of the dependent variable are used as explanatory factors. They correctly observe that the Jacobson and Aaker (1985; hereafter denoted JA) model has explanatory factors that are also components of the ROI dependent variable and, as such, is subject to “composite variable bias.” FPA note that another way of viewing composite variable bias is that the coefficients in the model reflect not their impact on the dependent variable but rather their impact on the dependent variable less the elements of the components included as explanatory factors. As such, additional effects (analogous to indirect effects) may be present to the extent strategic factors influence the included components. FPA conclude that such bias explains the low estimate of the market share effect reported in JA. However, FPA's attempt to replicate our analysis and assess composite variable bias is flawed by a mistake in their analysis, i.e., their disaggregate models do not follow from the JA aggregate specification. The purpose of this note is to correctly assess the extent to which the JA estimate of the market share effect is affected by composite variable bias and to suggest approaches for modeling a composite dependent variable in the presence of unobservable factors. In particular, we

(i) show that the disaggregate specifications of FPA do not follow from JA,

(ii) look at specifications not subject to composite variable bias to investigate the magnitude of the composite variable bias in JA, and

(iii) provide a disaggregate modeling framework that controls for unobservable effects.
Warranty Policy and Extended Service Contracts: Theory and an Application to Automobiles
Authors: Padmanabhan V. , Rao Ram C.
Published: October 2008

This paper characterizes the manufacturer warranty policy and its effect on consumer behavior under the following conditions: consumers are heterogeneous in risk-preferences, consumer actions affecting the probability of warranty redemption are unobservable to the manufacturer, and the product reliability is known. We obtain the “menu” of warranty contracts, and then make connections with its institutional counterpart: the extended service contract.

The model's implications for consumer behavior are examined using data obtained from a sample of recent buyers of new cars. The role of risk in consumer behavior with respect to choice of extended service contracts, and the allocation of effort for maintenance are found to be consistent with the model's predictions.

The empirical analysis permits quantifying the demand for extended service contracts as a function of the extent of manufacturer warranty. The estimates show that for our sample of buyers a manufacturer warranty of three years is optimal in the sense of overcoming the role of risk-aversion in the choice of extended service contracts.
An Implemented System for Improving Promotion Productivity Using Store Scanner Data
Authors: Abraham Magid M. , Lodish Leonard M.
Published: October 2008

“Single Source” databases based on scanner data offer new opportunities for evaluating promotions and improving their effectiveness. Decision support needs vary depending on the decision maker's organizational vantage point. Some managers require the evaluation of promotion results in the short term. Others should take a medium- to long-term focus. An implemented model and automated system for measuring short-term incremental volume due to promotions by developing baselines of store-level “normal” sales is presented using store-level scanner data. Empirical validation results and real life applications are presented and discussed, including the use of the baselines as measures of “brand health.”
Testing Predicted Choices Against Observations in Probabilistic Discrete-Choice Models
Authors: Horowitz Joel L. , Louviere Jordan J.
Published: October 2008

Probabilistic discrete-choice models, such as multinomial logit models, are widely used to predict changes in market shares or total demand resulting from changes in policy variables under management control. These models often are evaluated in terms of their ability to predict choices in a holdout sample. This paper presents a new test for comparing predicted and observed choices. The results of a Monte Carlo experiment indicate that the new test has good finite-sample properties and high power in several circumstances likely to arise frequently in applications.
A Retailer Promotion Policy Model Considering Promotion Signal Sensitivity
Authors: Inman J. Jeffrey , McAlister Leigh
Published: October 2008

Recent research suggests that the signal (e.g., sign or marker) with a point of purchase promotion will stimulate a significant sales increase, regardless of whether or not that signal is accompanied by a price cut. This paper develops a model of retailer profitability that incorporates this “promotion signal sensitivity.” In a field test, the profitability of the promotion policy prescribed by this model is compared to the profitability of two other promotion policy-setting paradigms: a model-based policy that does not consider promotion signal sensitivity and one prescribed by industry experts. The test results support the proposed model. Its policy generates 11% more category profit per unit than the model-based policy and 12% more than the industry experts. Implications for retailers and future research are discussed.
Analyzing Duration Times in Marketing: Evidence for the Effectiveness of Hazard Rate Models
Authors: Helsen Kristiaan , Schmittlein David C.
Published: October 2008

Some statistical methods developed recently in the biometrics and econometrics literature show great promise for improving the analysis of duration times in marketing. They incorporate the right censoring that is prevalent in duration times data, and can be used to make a wide variety of useful predictions. Both of these features make these methods preferable to the regression, logit, and discriminant analyses that marketers have typically used in analyzing durations.

This paper is intended to fulfill three objectives. First, we demonstrate how decision situations that involve durations differ from other marketing phenomena. Second, we show how standard modeling approaches to handle duration times can break down because of the peculiarities inherent in durations. It has been suggested in recent marketing articles that an alternative to these conventional procedures, i.e., hazard rate models and proportional hazard regression, can more effectively handle duration type data. Third, to investigate whether these proposed benefits are in fact delivered for marketing durations data, we estimate and validate both conventional and hazard rate models for household interpurchase times of saltine crackers. Our findings indicate the superiority of proportional hazard regression methods vis-à-vis common procedures in terms of stability and face validity of the estimates and in predictive accuracy.
Cross-Validating Regression Models in Marketing Research
Authors: Steckel Joel H. , Vanhonacker Wilfried R.
Published: October 2008

In this paper, a formal test on prediction errors is developed for the cross-validation of regression models under the simple random splitting framework. Analytic as well as simulation results relate the statistical power of the test to the allocation of sample observations to estimation and validation subsets. The results indicate that splitting the data into halves is suboptimal. More observations should be used for estimation than validation. Furthermore, the proportion of the sample optimally devoted to validation is small for very limited samples (N < 20), increases to about 40% for medium-sized samples and decreases again for large samples (N > 60). However, although the 50/50 split is suboptimal, it is not tremendously so in a wide variety of circumstances.
Durable-Goods Monopolists, Rational Consumers, and Improving Products
Authors: Dhebar Anirudh
Published: October 2008

We consider the case of a monopolist supplying an improving durable product to a population that is heterogeneous in its valuation of product quality. In a two-period framework, we show that if consumers expect the product to improve in “present-value” terms, then intertemporal discrimination might result in the first-period marginal consumer being left with zero surplus and some higher-end consumers postponing purchase. The resulting trajectories for quality and price do not constitute a subgame-perfect equilibrium.

One of our conclusions is that the logic of profit maximization in the context of rational consumer choice imposes a demand-side constraint on the rate of product improvement. We also emphasize the disequilibrium consequences of improving a product so rapidly that high-end consumers are tempted to wait for a future new-and-improved version. Finally, the formulation adopted in the paper may be useful to understand observed differences in product improvement rates in different markets.
Gaining More by Stocking Less: A Competitive Analysis of Product Availability
Authors: Balachander Subramanian , Farquhar Peter H.
Published: October 2008

The price competition between two firms can affect their decisions about product availability. With occasional stockouts a firm loses from foregone sales, yet it may indirectly benefit from the higher price a competitor is able to charge. The more prone customers are to search elsewhere for the product upon encountering a stockout, the greater is the gain from the reduced price competition between firms.

This paper establishes conditions whereby the strategic interaction of reduced price competition between firms outweighs the loss from foregone sales. In such cases, a firm can increase its expected profits by choosing to stock less. These results provide a competitive rationale for the high stockout levels observed in some retail situations and have implications for the analysis of product availability in public policy settings.
Customer Base Analysis: An Industrial Purchase Process Application
Authors: Schmittlein David C. , Peterson Robert A.
Published: October 2008

Customer base analysis is concerned with using the observed past purchase behavior of customers to understand their current and likely future purchase patterns. More specifically, as developed in Schmittlein et al. (1987), customer base analysis uses data on the frequency, timing, and dollar value of each customer's past purchases to infer

• the number of customers currently active,

• how that number has changed over time,

• which individual customers are most likely still active,

• how much longer each is likely to remain an active customer, and

• how many purchases can be expected from each during any future time period of interest.

In this paper we empirically validate the model proposed by Schmittlein et al. In doing so, we provide one of the few applications of stochastic models to industrial purchase processes and industrial marketing decisions. Besides showing that the model does capture key aspects of the purchase process, we also present a more effective parameter estimation method and some results regarding sampling properties of the parameter estimates. Finally, we extend the model to explicitly incorporate dollar volume of past purchases.

Our results indicate that this kind of customer base analysis can be both effective in predicting purchase patterns and in generating insights into how key customer groups differ. The link of both these benefits to industrial marketing decision making is also discussed.
The Governance of Exclusive Territories When Dealers can Bootleg
Authors: Dutta Shantanu , Bergen Mark , John George
Published: October 2008

A transaction cost approach is used to investigate a manufacturer's policy towards exclusive territory dealers who bootleg (sell across their assigned territories). We show that optimal enforcement policies will generally tolerate some level of bootlegging. This tolerance is a natural consequence of the transaction cost principle that institutional arrangements are not fully enforceable, and that self-enforcing implicit agreements will require some degree of tolerance. The actual degree of tolerance is determined by (a) the importance of reseller services, (b) the reduction in margin realized from surreptitious sales, and (c) the resellers' beliefs about the manufacturer's long-run commitment to the channel. We also show that deploying exclusive territories is beneficial to the manufacturer because it safeguards reseller services and permits resellers to capitalize on their superior local information. However, the latter effect is contingent on being able to convince resellers of the manufacturer's long run commitment to the channel.
The Effect of Package Coupons on Brand Choice
Authors: Raju Jagmohan S. , Dhar Sanjay K. , Morrison Donald G.
Published: October 2008

We propose a stochastic choice model, and supporting empirical analyses, to understand the effect of package coupons on brand choice. Package coupons can be broadly classified into three types: peel off coupons, on-pack coupons, and in-pack coupons. Our model helps understand the relative impact of these three types of coupons on market share. We find that on-pack coupons may lead to a higher market share than peel-off coupons. What makes this result potentially interesting is that while the benefit of a peel-off coupon is realized immediately, the consumer has to wait until the next purchase occasion to cash in the benefit of an on-pack coupon. Though we primarily examine situations where package coupons are dropped frequently, a scenario that is quite representative of today's marketplace, we show that our results are also applicable when a manager is evaluating a particular coupon campaign. We compare the key predictions of our model with data collected from a series of in-store quasi-experiments. The data are consistent with the model's predictions.
Why the Bass Model Fits without Decision Variables
Authors: Bass Frank M. , Krishnan Trichy V. , Jain Dipak C.
Published: October 2008

Over a large number of new products and technological innovations, the Bass diffusion model (Bass 1969) describes the empirical adoption curve quite well. In this study, we generalize the Bass model to include decision variables such as price and advertising. The generalized model reduces to the Bass model as a special case and explains why the Bass model works so well without including decision variables. We compare our generalized Bass model to other approaches from the literature for including decision variables into diffusion models, and our results provide both theoretical and empirical support for the generalized Bass model. We also show how our generalized Bass model can be used for product planning purposes.
Analysis of New Product Diffusion Using a Four-Segment Trial-Repeat Model
Authors: Hahn Minhi , Park Sehoon , Krishnamurthi Lakshman , Zoltners Andris A.
Published: October 2008

A four segment trial-repeat model is developed to model sales of a frequently purchased product in the early stage of the product's life cycle. The model can be calibrated using aggregate data alone. Two versions of the model, one emphasizing the competitive aspect of marketing communications and another emphasizing the informative aspect, are estimated from data on 21 newly launched pharmaceutical products. The model provides valuable diagnostics such as an early estimate of the long-run market share of the new product, a decomposition of total sales (into trial sales due to marketing activities, trial sales due to word-of-mouth, and repeat sales), the changing composition of the trial market and repeat market over time, and the time when the trial market is expected to be saturated. In addition, the effectiveness of the entrant's marketing efforts, word-of-mouth communication, and buyers' trial experience are analyzed with the model. A cross-sectional analysis based on the empirical estimation results of our model reveals interesting insights into product introduction strategies. We find that: 1) the effectiveness of the firms' communication activities on trial is related mainly to product quality attributes and market growth whereas that of word-of-mouth is associated with product class characteristics and market competitiveness, and 2) the effect of product trial on repeat purchases is related mainly to product quality attributes and various market characteristics such as size, growth, competitiveness, and familiarity.
Competitive Positioning in Markets with Nonuniform Preferences
Authors: Ansari Asim , Economides Nicholas , Ghosh Avijit
Published: October 2008

We investigate the nature of competitive equilibrium for brands competing in a multi-attribute product space when consumer preferences for product attributes follow nonuniform distributions. We establish subgame-perfect equilibria in a two-stage game, where firms choose positions in the first stage and prices in the second stage. Two types of entry scenarios are investigated. In the first, the number of brands is given exogenously, and all of them choose positions simultaneously. In the second scenario, firms enter in sequence, and the early entrants can choose strategies to deter the entry of later entrants. We find the equilibria for two, three, and four brands for consumer preferences that follow a beta distribution. Nonuniform distributions result in equilibrium configurations that are substantially different from those obtained for uniform consumer distributions. In the two brands case, for sufficiently concentrated distributions we find asymmetric position equilibria with one firm at the corner of the market and one firm at an interior position. In the case of three brands, for sufficiently concentrated preferences we find symmetric equilibria that do not yield maximal differentiation. We also establish an equilibrium for the case of four competing brands. In addition we characterize entry deterring positioning strategies and examine how they vary with the distribution of consumer preferences.
A Model of Stochastic Variety-Seeking
Authors: Trivedi Minakshi , Bass Frank M. , Rao Ram C.
Published: October 2008

In this paper, we propose and test a stochastic model of consumer choice that incorporates attribute-based variety seeking. Our stochastic variety-seeking model (SVS) has nested within it a fixed variety-seeking model, a zero-order model of choice, and a first-order (“pure variety”) model. We compare the SVS model to alternative models. Under stochastic variety seeking, we examine the nature of the variety sought and provide a test of the “satiation” hypothesis.

Unlike fixed variety-seeking models, our model allows variety seeking to vary in intensity and consistency over individuals as well as over purchase occasions. We show that the model is equivalent to a random utility model with the features that the attributes of brands relative to those of the brand previously bought influence choice, and the extent of variety seeking is random over choice occasions for a given individual. The model permits a closed-form solution to the conditional switching probabilities parameterized by variety-seeking parameters, and dependent on brand attributes.

We apply our model to individual choice data obtained from a field study specifically designed for the purpose at hand.
Customer Satisfaction Incentives
Authors: Hauser John R. , Simester Duncan I. , Wernerfelt Birger
Published: October 2008

Customer satisfaction incentive schemes are increasingly common in a variety of industries. We offer explanations as to how and when incenting employees on customer satisfaction is profitable and offer several recommendations for improving upon current practice. Faced with employee groups (including managers) who may have shorter time horizons than the firm, such systems enable a firm to use customer reaction to monitor implicitly how employees allocate effort between the short and long terms. These systems can be used to encourage employees to make tradeoffs that are in the best interests of the firm.

We derive optimal reward systems for an equilibrium in which the firm maximizes profits, employees maximize their expected utility, and customers choose purchase quantities based on initial reputations, employee efforts (both ephemeral and enduring), and price. The formal model shows how the reliance placed on customer satisfaction in an incentive scheme should depend upon the precision with which customer satisfaction is measured and the extent to which employees focus on the short term. Recommendations for improving upon current practice include: measure customers, former customers, and potential customers; measure satisfaction with competitors' products; disaggregate satisfaction to reflect better the performance of employee groups, and, when different customer segments have different switching costs or they vary in the precision with which their satisfaction can be measured, then measure the segments separately and assign different weights in the incentive plan.

Throughout the paper we interpret the formal results based on our experience with actual firms and the current literature. We close with a brief discussion of on-going research at field sites.
Pull Promotions and Channel Coordination
Authors: Gerstner Eitan , Hess James D.
Published: October 2008

This paper recommends that manufacturers consider a pull price promotion as a coordination device in an independent channel of distribution. Uncoordinated decisions of both manufacturer and retailer to charge high prices can break down the effort to expand the market, resulting in losses to the channel as a whole. We show that manufacturers can enhance channel price coordination by designing pull price discounts that target price-conscious consumers. The increased price coordination improves total channel profits and consumer surplus. Supporting pull with push increases the probability of coordination.
Flexibility in Consumer Purchasing for Uncertain Future Tastes
Authors: Walsh John W.
Published: October 2008

Consumers often simultaneously purchase multiple units in the same product category. Whether they are best off purchasing an assortment of alternatives or an equal number of one alternative is addressed in this paper. Models of an expected-utility-maximizing consumer are developed, and it is shown that an assortment may have greater expected utility than an equal number of any one alternative. The rationale is that the assortment allows the consumer to choose from inventory the alternative most appropriate for a consumption occasion using preference information not available at the purchase occasion. It is also shown that, when consuming alternatives from inventory, the consumer may forego the alternative offering the most utility in the expectation that it will yield even more utility in the future.
Has Power Shifted in the Grocery Channel?
Authors: Messinger Paul R. , Narasimhan Chakravarthi
Published: October 2008

Retailers have not gained profitability at the expense of manufacturers in the last two decades, according to accounting and stock market measures of profits, despite substantial industry restructuring and new forms of channel rivalry. Both manufacturers and retailers have experienced reductions in profitability. Consumers may be the net beneficiaries these and other changes. In this study we survey the recent evolution of the grocery channel, examine the connections between changes in channel structure, conduct, and performance, and assess whether profitability has shifted as a result. We relate these findings to the issue of whether power has shifted in the grocery channel.
Product and Price Competition in a Two-Dimensional Vertical Differentiation Model
Authors: Vandenbosch Mark B. , Weinberg Charles B.
Published: October 2008

In this paper, the one-dimensional vertical differentiation model (Shaked and Sutton [Shaked, A., J. Sutton. 1982. Relaxing price competition through product differentiation. Rev. Econom. Stud. 49 3–13.], Moorthy [Moorthy, K. S. 1988. Product and price competition in a Duopoly. Marketing Sci. 7(Spring) 141–168.]) is extended to two dimensions and an analysis of product and price competition is presented. A two-stage game theoretic analysis in which two firms compete first on product positions and then on price is conducted. Closed form equilibrium solutions are obtained for each stage in which competitors are unrestricted in their choices of price or product positions. A significant finding of this research is that unlike the one-dimensional vertical differentiation model, firms do not tend towards maximum differentiation, although this solution is possible under certain conditions. When the range of positioning options on each of the dimensions is equal, MaxMin product differentiation occurs. That is, in equilibrium, the two firms tend to choose positions which will represent maximum differentiation on one dimension and minimum differentiation on the other dimension.
A Relatively Unbiased Measure of Discrimination Ability in Product Design: An Addendum to Buchanan and Henderson (1992)
Authors: Henderson Pamela W. , Buchanan Bruce
Published: October 2008

In this addendum, we present a measure of discrimination ability that is free of the downwardly biasing assumptions of previous discrimination measures. We discuss the magnitude of the bias in the previous measures, the reliability of all of the measures, intercorrelations among them, and their appropriate uses.
Tackling the Retailer Decision Maze: Which Brands to Discount, How Much, When and Why?
Authors: Tellis Gerard J. , Zufryden Fred S.
Published: October 2008

We propose a model that seeks the optimal timing and depth of retail discounts with the optimal timing and quantity of the retailer's order over multiple brands and time periods. The model is based on an integration of consumer decisions in purchase incidence, brand choice and quantity with the dynamics of household and retail inventory. The major contribution of the model is that it shows how the optimum depth and timing of discount varies with key demand characteristics such as consumer stockpiling, loyalty, response to the marketing mix, and segmentation. In addition, the optima also vary with key supply characteristics such as retail margins, depth and frequency of manufacturer deals, retail inventory, and retagging costs. The most valuable contribution of the model is that it can provide an optimal discount strategy for multiple brands over multiple time periods.

The optimization model runs on a user-friendly personal computer program. An application based on UPC scanner data illustrates the model's uses. Sensitivity analyses of the optimization model under alternative scenarios reveal novel insights as to how optimal discounts vary as a function of the key demand and supply characteristics.
Introduction to the Special Issue: Empirical Generalizations in Marketing
Authors: Bass Frank M. , Wind Jerry
Published: October 2008

It is our hope that some of the empirical generalizations presented in this volume would be of practical value to management. Some of the generalizations help codify our knowledge—they are discussed in several papers—some can serve as useful guidelines in the generation of strategic marketing options. In addition, we hope that this volume would stimulate additional research and actions by marketing scientists in industry and academia.
How Promotions Work
Authors: Blattberg Robert C. , Briesch Richard , Fox Edward J.
Published: October 2008

By synthesizing findings across the sales promotion literature, this article helps the reader understand how promotions work. We identify and explain empirical generalizations related to sales promotion; that is, effects that have been found consistently in multiple studies involving different researchers. We also identify issues which have generated conflicting findings in the research, as well as important sales promotion topics that have not yet been studied. This overview of the research and findings from the sales promotion literature is intended to offer direction for future research in the area.