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Truth in Concentration in the Land of (80/20) Laws

Author

Listed:
  • David C. Schmittlein

    (University of Pennsylvania)

  • Lee G. Cooper

    (University of California, Los Angeles)

  • Donald G. Morrison

    (University of California, Los Angeles)

Abstract

Among the more prominent truisms in marketing are 80/20 type laws, e.g., 20 percent of the customers account for 80 percent of the purchases. These kinds of statistics indicate a certain degree of in customer purchases; i.e., the extent to which a large portion of the product's total purchases are made by a small fraction of all customers. Such concentration levels, suggesting that markets can be segmented in various ways, are often reported in basic marketing texts. We show that a of these concentration statistics is not nearly as easy or immediate as it is to compute them. The key factors influencing the degree of in purchases are reviewed, and we present a modeling approach for estimating the true level of among customers.

Suggested Citation

  • David C. Schmittlein & Lee G. Cooper & Donald G. Morrison, 1993. "Truth in Concentration in the Land of (80/20) Laws," Marketing Science, INFORMS, vol. 12(2), pages 167-183.
    • Handle: RePEc:inm:ormksc:v:12:y:1993:i:2:p:167-183
    DOI: 10.1287/mksc.12.2.167
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    Cited by:

    1. Flavio Pino, 2022. "The microeconomics of data – a survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 635-665, September.
    2. Esteves, Rosa-Branca, 2022. "Can personalized pricing be a winning strategy in oligopolistic markets with heterogeneous demand customers? Yes, it can," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    3. Giang Tue Trinh & John Dawes & Byron Sharp, 2024. "Where is the brand growth potential? An examination of buyer groups," Marketing Letters, Springer, vol. 35(1), pages 95-106, March.
    4. Dutta, Shantanu & Bergen, Mark & Levy, Daniel, 2002. "Price flexibility in channels of distribution: Evidence from scanner data," Journal of Economic Dynamics and Control, Elsevier, vol. 26(11), pages 1845-1900, September.
    5. Shun-Chuan Chang & Ying-Chan Tang, 2015. "Exploring heterogeneity of distribution intensity: Evidence from emerging market entry experience with benchmark brands in China," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(1), pages 1-15, January.
    6. Martin, James & Nenycz-Thiel, Magda & Dawes, John & Tanusondjaja, Arry & Cohen, Justin & McColl, Bruce & Trinh, Giang, 2020. "Fundamental basket size patterns and their relation to retailer performance," Journal of Retailing and Consumer Services, Elsevier, vol. 54(C).
    7. Mizerski, Richard & Mizerski, Katherine & Lam, Desmond & Lee, Alvin, 2013. "Gamblers' habit," Journal of Business Research, Elsevier, vol. 66(9), pages 1605-1611.
    8. Baek Jung Kim & Vishal Singh & Russell S. Winer, 2017. "The Pareto rule for frequently purchased packaged goods: an empirical generalization," Marketing Letters, Springer, vol. 28(4), pages 491-507, December.
    9. Huang, Ava & Dawes, John & Lockshin, Larry & Greenacre, Luke, 2017. "Consumer response to price changes in higher-priced brands," Journal of Retailing and Consumer Services, Elsevier, vol. 39(C), pages 1-10.
    10. Demetrios Vakratsas & Frank M. Bass, 2002. "A segment-level hazard approach to studying household purchase timing decisions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(1), pages 49-59.
    11. Anesbury, Zachary William & Talbot, Danielle & Day, Chanel Andrea & Bogomolov, Tim & Bogomolova, Svetlana, 2020. "The fallacy of the heavy buyer: Exploring purchasing frequencies of fresh fruit and vegetable categories," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    12. Kwak, Kiho & Kim, Namil, 2020. "Concentrate or disperse? The relationship between major customer concentration and supplier profitability and the moderating role of insider ownership," Journal of Business Research, Elsevier, vol. 109(C), pages 648-658.

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