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The Effect of Product Assortment Changes on Customer Retention

Author

Listed:
  • Sharad Borle

    (Jones Graduate School of Management, Rice University, Houston, Texas 77252)

  • Peter Boatwright

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Joseph B. Kadane

    (Leonard J. Savage University Professor of Statistics and Social Sciences, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Joseph C. Nunes

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

  • Shmueli Galit

    (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

Abstract

This research investigates the impact of a large-scale assortment reduction on customer retention, utilizing a model we develop to explore the effect on sales at both the store level and the category level simultaneously. We apply our model to a data set provided by an online grocer. The data contain detailed household purchase records for every category in the store. Our results indicate that the reduction in assortment overall store sales, a result that contrasts with that of all of the recent studies on assortment reductions (Food Marketing Institute. 1993. Variety or duplication: A process to know where you stand. Prepared by Willard Bishop Consulting and Information resources, Inc., in cooperation with Frito Lay; Drèze, Xavier, Stephen J. Hoch, Mary E. Purk. 1994. Shelf management and space elasticity. (4) 301–326; Broniarczyk, Susan M., Wayne D. Hoyer, Leigh McAlister. 1998. Consumers' perceptions of the assortment offered in a grocery category: The impact of item reduction. (May) 166–176; Boatwright, Peter, Joseph C. Nunes. 2001. Reducing assortment: An attribute-based approach. (July) 50–63; Boatwright, Peter, Joseph C. Nunes. 2004. Correction note for “Reducing assortment: An attribute-based approach.” . Forthcoming). We find the reduction had a negative effect on both shopping frequency and purchase quantity, and we find that the decline in shopping frequency resulted in a greater loss than did the reduction in purchase quantities. We also find that the impact of the assortment cut varies widely by category, with less-frequently purchased categories more adversely affected. The variation in the assortment reduction's impact across categories suggests that managers compare select categories in order to moderate the overall loss in sales.

Suggested Citation

  • Sharad Borle & Peter Boatwright & Joseph B. Kadane & Joseph C. Nunes & Shmueli Galit, 2005. "The Effect of Product Assortment Changes on Customer Retention," Marketing Science, INFORMS, vol. 24(4), pages 616-622, July.
    • Handle: RePEc:inm:ormksc:v:24:y:2005:i:4:p:616-622
    DOI: 10.1287/mksc.1050.0121
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    References listed on IDEAS

    as
    1. Jie Zhang & Lakshman Krishnamurthi, 2004. "Customizing Promotions in Online Stores," Marketing Science, INFORMS, vol. 23(4), pages 561-578, June.
    2. Boatwright, Peter & Borle, Sharad & Kadane, Joseph B., 2003. "A Model of the Joint Distribution of Purchase Quantity and Timing," Journal of the American Statistical Association, American Statistical Association, vol. 98, pages 564-572, January.
    3. Greg M. Allenby & Thomas S. Shively & Sha Yang & Mark J. Garratt, 2004. "A Choice Model for Packaged Goods: Dealing with Discrete Quantities and Quantity Discounts," Marketing Science, INFORMS, vol. 23(1), pages 95-108, June.
    4. Koen Pauwels & Shuba Srinivasan, 2004. "Who Benefits from Store Brand Entry?," Marketing Science, INFORMS, vol. 23(3), pages 364-390, July.
    5. Galit Shmueli & Thomas P. Minka & Joseph B. Kadane & Sharad Borle & Peter Boatwright, 2005. "A useful distribution for fitting discrete data: revival of the Conway–Maxwell–Poisson distribution," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 54(1), pages 127-142, January.
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