IDEAS home Printed from https://ideas.repec.org/a/pal/jorsoc/v61y2010i10d10.1057_jors.2009.117.html
   My bibliography  Save this article

Analysing consumer segments to budget for loyalty and promotion programmes and maximize market share

Author

Listed:
  • H-Y Tsao

    (Takming University of Science and Technology, Taipei)

  • L Pitt

    (Simon Fraser University)

  • C Campbell

    (Simon Fraser University)

Abstract

This paper seeks to provide a framework and benchmark for the allocation of marketing budget between promotion and loyalty programmes using an approach that combines a Markov-type market share model and the Lagrange multiplier method to maximize market share. The Lagrange multiplier method, that takes into account the market share and the loyalty effect observable in preceding periods along with the estimated promotional effects, permits the allocation to be optimized and future market share to be maximized. Then, loyalty-based consumer segment are used to explain why the budgeting exercise can achieve the maximization objective. To this end, the study uses consumer panel data concerning three categories, namely, adult milk powder, shampoo, and detergent. It extends previous research on loyalty-based segmentation by focusing on the budget allocation between the two options of loyalty enhancement and promotion programming. A Budget Allocation Grid for Loyalty-based Segmentation is proposed as an aid to understand budget allocation between loyalty and promotion programmes based on the relative sizes of exclusive-loyalty and variety-seeking segments.

Suggested Citation

  • H-Y Tsao & L Pitt & C Campbell, 2010. "Analysing consumer segments to budget for loyalty and promotion programmes and maximize market share," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(10), pages 1523-1529, October.
    • Handle: RePEc:pal:jorsoc:v:61:y:2010:i:10:d:10.1057_jors.2009.117
    DOI: 10.1057/jors.2009.117
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/jors.2009.117
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/jors.2009.117?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yim, Chi Kin & Kannan, P. K., 1999. "Consumer Behavioral Loyalty:: A Segmentation Model and Analysis," Journal of Business Research, Elsevier, vol. 44(2), pages 75-92, February.
    2. Uncles, Mark D. & Ehrenberg, Andrew S. C. & Goodhardt, Gerald J., 2004. "Reply to commentary on "Understanding brand performance measures: using Dirichlet benchmarks"," Journal of Business Research, Elsevier, vol. 57(12), pages 1329-1330, December.
    3. Buckinx, Wouter & Van den Poel, Dirk, 2005. "Customer base analysis: partial defection of behaviourally loyal clients in a non-contractual FMCG retail setting," European Journal of Operational Research, Elsevier, vol. 164(1), pages 252-268, July.
    4. Moshe Givon & Dan Horsky, 1990. "Untangling the Effects of Purchase Reinforcement and Advertising Carryover," Marketing Science, INFORMS, vol. 9(2), pages 171-187.
    5. Patrick S. McCarthy & P. K. Kannan & Radha Chandrasekharan & Gordon P. Wright, 1992. "Estimating Loyalty and Switching with an Application to the Automobile Market," Management Science, INFORMS, vol. 38(10), pages 1371-1393, October.
    6. Moshe Givon, 1984. "Variety Seeking Through Brand Switching," Marketing Science, INFORMS, vol. 3(1), pages 1-22.
    7. Moshe Givon & Dan Horsky, 1978. "Market Share Models as Approximators of Aggregated Heterogeneous Brand Choice Behavior," Management Science, INFORMS, vol. 24(13), pages 1404-1416, September.
    8. Givon, Moshe & Horsky, Dan, 1994. "Intertemporal aggregation of heterogeneous consumers," European Journal of Operational Research, Elsevier, vol. 76(2), pages 273-282, July.
    9. Barbara E. Kahn & Jagmohan S. Raju, 1991. "Effects of Price Promotions on Variety-Seeking and Reinforcement Behavior," Marketing Science, INFORMS, vol. 10(4), pages 316-337.
    10. Ehrenberg, Andrew S. C. & Uncles, Mark D. & Goodhardt, Gerald J., 2004. "Understanding brand performance measures: using Dirichlet benchmarks," Journal of Business Research, Elsevier, vol. 57(12), pages 1307-1325, December.
    11. Philip H. Hartung & James L. Fisher, 1965. "Brand Switching and Mathematical Programming in Market Expansion," Management Science, INFORMS, vol. 11(10), pages 231-243, August.
    12. S. Sriram & Manohar U. Kalwani, 2007. "Optimal Advertising and Promotion Budgets in Dynamic Markets with Brand Equity as a Mediating Variable," Management Science, INFORMS, vol. 53(1), pages 46-60, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hsiu-Yuan Tsao & Lucy M. Matthews & Victoria L. Crittenden, 2012. "Balancing Market Share Growth And Customer Profitability: Budget Allocation For Customer Acquisition And Retention," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 3(2).
    2. Hsiu-Yuan Tsao, 2013. "Budget allocation for customer acquisition and retention while balancing market share growth and customer equity," Marketing Letters, Springer, vol. 24(1), pages 1-11, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. H-Y Tsao & P-C Lin & L Pitt & C Campbell, 2009. "The impact of loyalty and promotion effects on retention rate," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(5), pages 646-651, May.
    2. Hsiu-Yuan Tsao & Lucy M. Matthews & Victoria L. Crittenden, 2012. "Balancing Market Share Growth And Customer Profitability: Budget Allocation For Customer Acquisition And Retention," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 3(2).
    3. Marshall Freimer & Dan Horsky, 2008. "Try It, You Will Like It—Does Consumer Learning Lead to Competitive Price Promotions?," Marketing Science, INFORMS, vol. 27(5), pages 796-810, 09-10.
    4. Bustos-Reyes, César Augusto & González-Benito, Óscar, 2008. "Store and store format loyalty measures based on budget allocation," Journal of Business Research, Elsevier, vol. 61(9), pages 1015-1025, September.
    5. Gauthier Casteran & Polymeros Chrysochou & Lars Meyer-Waarden, 2019. "Brand loyalty evolution and the impact of category characteristics," Marketing Letters, Springer, vol. 30(1), pages 57-73, March.
    6. Dawes, John, 2022. "Factors that influence manufacturer and store brand behavioral loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 68(C).
    7. Nardi, Vinicius Antonio Machado & Jardim, William Carvalho & Ladeira, Wagner Júnior & Santini, Fernando, 2020. "A meta-analysis of the relationship between customer participation and brand outcomes," Journal of Business Research, Elsevier, vol. 117(C), pages 450-460.
    8. Hanna Górska-Warsewicz, 2022. "Consumer or Patient Determinants of Hospital Brand Equity—A Systematic Literature Review," IJERPH, MDPI, vol. 19(15), pages 1-36, July.
    9. 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).
    10. Trinh, Giang & Wright, Malcolm J., 2022. "Predicting future consumer purchases in grocery retailing with the condensed Poisson lognormal model," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    11. Dawes, John, 2020. "The Natural Monopoly effect in brand purchasing: Do big brands really appeal to lighter category buyers?," Australasian marketing journal, Elsevier, vol. 28(2), pages 90-99.
    12. Trinh, Giang & Dawes, John, 2020. "A comparison of brand loyalty between on the go and take-home consumption purchases," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    13. Bogomolova, Svetlana, 2016. "Determinants of ex-customer winback in financial services," Journal of Retailing and Consumer Services, Elsevier, vol. 32(C), pages 1-6.
    14. Graham, Charles & Khan, Kamran & Ilyas, Muhammad, 2019. "Estimating the value of passing trade from pedestrian density," Journal of Retailing and Consumer Services, Elsevier, vol. 46(C), pages 103-111.
    15. Banelis, Melissa & Riebe, Erica & Rungie, Campbell M., 2013. "Empirical evidence of repertoire size," Australasian marketing journal, Elsevier, vol. 21(1), pages 59-65.
    16. Foubert, Bram & Gijsbrechts, Els, 2010. "Please or Squeeze? Brand performance implications of constrained and unconstrained multi-item promotions," European Journal of Operational Research, Elsevier, vol. 202(3), pages 880-892, May.
    17. Nenycz-Thiel, Magda & Sharp, Byron & Dawes, John & Romaniuk, Jenni, 2010. "Competition for memory retrieval between private label and national brands," Journal of Business Research, Elsevier, vol. 63(11), pages 1142-1147, November.
    18. Nanarpuzha, Rajesh, 2013. "Modeling Situational Factors in Variety Seeking Behaviour: An Extension of the Lightning Bolt Model," IIMA Working Papers WP2013-12-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    19. Szymanowski, Maciej & Gijsbrechts, Els, 2013. "Patterns in consumption-based learning about brand quality for consumer packaged goods," International Journal of Research in Marketing, Elsevier, vol. 30(3), pages 219-235.
    20. Martina Zámková & Stanislav Rojík & Martin Prokop & Simona Činčalová & Radek Stolín, 2022. "Czech Consumers’ Preference for Organic Products in Online Grocery Stores during the COVID-19 Pandemic," IJERPH, MDPI, vol. 19(20), pages 1-14, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jorsoc:v:61:y:2010:i:10:d:10.1057_jors.2009.117. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.