Observed and Unobserved Preference Heterogeneity in Brand-Choice Models
AbstractThis paper extends the scanner-based choice literature by explicitly incorporating individual-level brand-preference data. We illustrate our model using a unique data set that combines survey and scanner data collected from the same individuals. The addition of individual-specific brand-preference information significantly improves fit and prediction. Furthermore, this “observed” heterogeneity better explains choice than does “unobserved” heterogeneity in the standard scanner model's parameters. More importantly, we find that the standard model underestimates the importance of consumers' brand preferences and overestimates both brand loyalties and price sensitivities. Brand loyalty is overestimated because models without preference information confound state dependence, heterogeneity, and preference effects. Price sensitivities are inflated because the “average” preference-based consumer is implicitly assumed to be more willing to switch from his preferred brand than is the “real” preference-based consumer. Further, standard models overestimate the heterogeneity in price and loyalty sensitivities and misidentify both price- and loyalty-sensitive consumers. The managerial implications of our findings and the applicability of our methodology when survey data are collected infrequently and for only a subsample of consumers are pursued. We demonstrate that even under these circumstances better populationwide pricing and promotion decisions are identified and more accurate targeting results.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Marketing Science.
Volume (Year): 25 (2006)
Issue (Month): 4 (07-08)
discrete choice; heterogeneity; scanner data;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Andrew Ching & Fumiko Hayashi, 2006.
"Payment card rewards programs and consumer payment choice,"
Payments System Research Working Paper
PSR WP 06-02, Federal Reserve Bank of Kansas City.
- Ching, Andrew T. & Hayashi, Fumiko, 2010. "Payment card rewards programs and consumer payment choice," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1773-1787, August.
- Ching, Andrew & Hayashi, Fumiko, 2008. "Payment Card Rewards Programs and Consumer Payment Choice," MPRA Paper 8458, University Library of Munich, Germany.
- Nicola Jentzsch & Geza Sapi & Irina Suleymanova, 2010.
"Joint Customer Data Acquisition and Sharing among Rivals,"
Discussion Papers of DIW Berlin
1045, DIW Berlin, German Institute for Economic Research.
- Jentzsch, Nicola & Sapi, Geza & Suleymanova, Irina, 2013. "Targeted pricing and customer data sharing among rivals," International Journal of Industrial Organization, Elsevier, vol. 31(2), pages 131-144.
- Jentzsch, Nicola & Sapi, Geza & Suleymanova, Irina, 2012. "Targeted pricing and customer data sharing among rivals," DICE Discussion Papers 60, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Fok, D. & Paap, R. & Franses, Ph.H.B.F., 2008.
"Incorporating responsiveness to marketing efforts in brand choice modelling,"
Econometric Institute Research Papers
EI 2008-15, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Dennis Fok & Richard Paap & Philip Hans Franses, 2014. "Incorporating Responsiveness to Marketing Efforts in Brand Choice Modeling," Econometrics, MDPI, Open Access Journal, vol. 2(1), pages 20-44, February.
- Oded Netzer & Olivier Toubia & Eric Bradlow & Ely Dahan & Theodoros Evgeniou & Fred Feinberg & Eleanor Feit & Sam Hui & Joseph Johnson & John Liechty & James Orlin & Vithala Rao, 2008. "Beyond conjoint analysis: Advances in preference measurement," Marketing Letters, Springer, vol. 19(3), pages 337-354, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.