Qin Zhang and P.B. Seetharaman
The purpose of this paper is to propose a method to help firms assess lifetime profitability of customers whose buying behaviors are characterized by purchasing cycles, which are…
Abstract
Purpose
The purpose of this paper is to propose a method to help firms assess lifetime profitability of customers whose buying behaviors are characterized by purchasing cycles, which are determined by both intrinsic purchasing cycles and cumulative effects of firms’ marketing solicitations.
Design/methodology/approach
This paper first proposes a probability model to predict customers’ responses to firms’ marketing solicitations in which a customer’s inter-purchase times are assumed to follow a Poisson distribution, whose parameters vary across customers and follow a gamma distribution. The paper then proposes a customer profitability scoring model that uses customers’ responses as an input to assess their lifetime profitability at a given point of time.
Findings
The paper illustrates the proposed method using individual-level purchasing data of 529 customers from a catalog firm. The paper shows that the proposed model outperforms the benchmark model in terms of both explaining and predicting customers’ purchases. The paper also demonstrates significant profit consequences to the firm if incorrect methods are used instead of the proposed method.
Practical implications
The proposed method can help firms select or eliminate customers based on their lifetime profitability so that firms can focus their marketing efforts in a more targeted manner to increase total profits.
Originality/value
The proposed Gamma-Poisson probability model and the profitability scoring method are easy to implement due to the attractive conjugacy property. It is valuable for firms’ customer relationship management applications from the standpoint of making customer selection and inventory management decisions.
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Mauricio Ferreira and Gonzalo Bravo
This study examined the determinants of attendance at the Chilean national soccer tournaments between 1990 and 2002. A multilevel model approach was taken to estimate the effects…
Abstract
This study examined the determinants of attendance at the Chilean national soccer tournaments between 1990 and 2002. A multilevel model approach was taken to estimate the effects of several factors, including unobserved sources, hypothesised to influence attendance in Chile. Results regarding team success, team division, population, stadium size and habitual persistence were found to influence professional soccer attendance; other factors such as admission price, age of team, international success, availability of soccer teams in the same vicinity and stadium ownership did not.
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Jagathiswary Ravichandran, Choi-Meng Leong, Tze-Yin Lim, Eva Lim and Lee-Yen Chaw
The purpose of the study is to conceptualize the model of the predictors of consumer willingness to purchase green products. This study used the underpinning theories related to…
Abstract
The purpose of the study is to conceptualize the model of the predictors of consumer willingness to purchase green products. This study used the underpinning theories related to consumer willingness by integrating the green concept in deriving the consumer willingness to purchase green products. Based on the underpinning theories of marketing strategies, it was found that marketing mix was still fundamental in business. Therefore, green marketing mix was proposed to describe the consumer's green purchase willingness. Furthermore, corporate social responsibility (CSR) plays an important role as the key to organizational strategy. Thus, CSR is also included in the proposed framework. As this is a conceptual paper, further empirical study needs to carry out to verify the proposed hypotheses. This study contributes to the market practitioners or entrepreneurs in terms of re-considering marketing mix and CSR in deriving customer willingness to purchase green products. This study extends the literature of behavioural intention by integrating green marketing strategies with CSR in determining consumer willingness to purchase.
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Empirical evidence indicates that cross-industry cooperation is a popular promotional format in which retailers can engage in market resource sharing and exchange. Although many…
Abstract
Purpose
Empirical evidence indicates that cross-industry cooperation is a popular promotional format in which retailers can engage in market resource sharing and exchange. Although many retailers participate in cross-industry joint promotion by issuing coupons to each other, the degree of correlation between cross-industry products and the consumer switching behavior can significantly impact the promotional effect of these coupons. The purpose of this paper is to investigate the effectiveness of the cross-industry joint promotion and the optimal coupon distribution strategy of retailers based on these two factors.
Design/methodology/approach
This paper analyzes the four cases of no cross-industry joint promotion, unilateral issuance of coupons and bilateral issuance of coupons, and discusses the best coupon distribution strategy for retailers based on the degree of product correlation and consumer switching costs. Furthermore, the applicability of the coupon distribution strategy is enhanced by incorporating numerical analysis.
Findings
The results show that the retailers can improve their income level by implementing cross-industry joint promotion. The retailers always price higher when only their promotional partners distribute coupons. When the degree of product correlation and consumer switching costs are high, the retailers issuing cross-industry coupons bilaterally is the optimal joint promotion strategy. When the degree of product correlation or consumer switching costs are low, the low-value retailer issuing coupons can achieve a win-win situation for retailers.
Originality/value
This paper addresses an interesting and practical issue related to the coupon distribution strategies based on the product correlation and consumer switching behavior, thereby providing new theoretical value and managerial implications for retailers to choose the optimal joint promotion strategy under different market conditions.
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Andres Musalem, Luis Aburto and Maximo Bosch
This paper aims to present an approach to detect interrelations among product categories, which are then used to produce a partition of a retailer’s business into subsets of…
Abstract
Purpose
This paper aims to present an approach to detect interrelations among product categories, which are then used to produce a partition of a retailer’s business into subsets of categories. The methodology also yields a segmentation of shopping trips based on the composition of each shopping basket.
Design/methodology/approach
This work uses scanner data to uncover product category interdependencies. As the number of possible relationships among them can be very large, the authors introduce an approach that generates an intuitive graphical representation of these interrelationships by using data analysis techniques available in standard statistical packages, such as multidimensional scaling and clustering.
Findings
The methodology was validated using data from a supermarket store. The analysis for that particular store revealed four groups of products categories that are often jointly purchased. The study of each of these groups allowed us to conceive the retail store under study as a small set of sub-businesses. These conclusions reinforce the strategic need for proactive coordination of marketing activities across interrelated product categories.
Research limitations/implications
The approach is sufficiently general to be applied beyond the supermarket industry. However, the empirical findings are specific to the store under analysis. In addition, the proposed methodology identifies cross-category interrelations, but not their underlying sources (e.g. marketing or non-marketing interrelations).
Practical implications
The results suggest that retailers could potentially benefit if they transition from the traditional category management approach where retailers manage product categories in isolation into a customer management approach where retailers identify, acknowledge and leverage interrelations among product categories.
Originality/value
The authors present a fast and wide-range approach to study the shopping behavior of customers, detect cross-category interrelations and segment the retailer’s business and customers based on information about their shopping baskets. Compared to existing approaches, its simplicity should facilitate its implementation by practitioners.
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Siddhartha Chib, P.B. Seetharaman and Andrei Strijnev
Empirical studies in Marketing have typically characterized a household's purchase incidence decision, i.e. the household's decision of whether or not to buy a product on a given…
Abstract
Empirical studies in Marketing have typically characterized a household's purchase incidence decision, i.e. the household's decision of whether or not to buy a product on a given shopping visit, as being independent of the household's purchase incidence decisions in other product categories. These decisions, however, tend to be related both because product categories serve as complements (e.g. bacon and eggs) or substitutes (e.g. colas and orange juices) in addressing the household's consumption needs, and because product categories vie with each other in attracting the household's limited shopping budget. Existing empirical studies have either ignored such inter-relationships altogether or have accounted for them in a limited way by modeling household purchases in pairs of complementary product categories. Given the recent availability of IRI market basket data, which tracks purchases of panelists in several product categories over time, and the new computational Bayesian methods developed in Albert and Chib (1993) and Chib and Greenberg (1998), estimating high-dimensional multi-category models is now possible. This paper exploits these developments to fit an appropriate panel data multivariate probit model to household-level contemporaneous purchases in twelve product categories, with the descriptive goal of isolating correlations amongst various product categories within the household's shopping basket. We provide an empirical scheme to endogenously determine the degree of complementarity and substitutability among product categories within a household's shopping basket, providing full details of the methodology. Our main findings are that existing purchase incidence models underestimate the magnitude of cross-category correlations and overestimate the effectiveness of the marketing mix, and that ignoring unobserved heterogeneity across households overestimates cross-category correlations and underestimate the effectiveness of the marketing mix.
Mouna Sebri and Georges Zaccour
The starting conjecture is that the market share of a brand in one category benefits from its performance in another category, and vice versa. The purpose of this paper is to…
Abstract
Purpose
The starting conjecture is that the market share of a brand in one category benefits from its performance in another category, and vice versa. The purpose of this paper is to assess the umbrella-branding spillovers by investigating the presence of synergy effect between categories when a retailer and/or a manufacturer decide to adopt/use the same name for his products. In fact, besides the cross-category dependency due to substitutability or complementarity, products can also be linked through their brand name in presence of an umbrella-branding strategy.
Design/methodology/approach
The authors propose an extended market-share model to account for the spillover effect at the brand level. The spillover is modeled to be generated by the brand's performance and not specific to marketing instruments, as done in the literature. They adopt a multiplicative competitive interaction (MCI) form for the attraction function. Based on aggregated data of two complementary oral-hygiene categories, the authors estimate the umbrella-branding spillover parameters using the iterate three-stage least squares (I3SLS) method. They contrast the results in three scenarios: no spillover, brand-constant spillover and brand-specific spillover.
Findings
The ensuing results indicate that umbrella-branding spillover is (i) significant and positive, i.e. the brand performance is boosted by its performance in a related category, through the so-called brand-attraction multiplier; (ii) asymmetric, i.e. the spillover is not equal in both directions; and associated to the market strength of each competing brand; (iii) variable across brands. The results show that not accounting for umbrella-branding spillover leads to misestimating the parameters and has a considerable impact on price-elasticities computation.
Research limitations/implications
Because store brands and some national brands exist in many categories, and thus because consumers make inferences when they face a large number of brands in different categories, spillover effects cannot be labelled as simply complementary or substitution-related. Future research may provide insight about the spillover phenomenon in a more general framework that would consider the spillover occurring between more than two categories.
Practical implications
Providing accurate assessment for umbrella-branding spillovers governing the competing brands, the results offer a relevant and straightforward method for decision makers to precisely assess the impact of a marketing effort in one category on the retailer's global performance. The findings provide better forecasts of market response in terms of sales and profit, within a cross-category perspective.
Originality/value
This study develops and estimates a market-share model with the aim of measuring brand-category spillover effects. The literature dealt with cross-category interactions in terms of substitutability or complementarity between the products offered in the two or more categories under investigation. Here, the focal point (and contribution) of the authors is the link at the brand level. Indeed, the authors only require that a minimum of one brand is offered in at least two of the categories of interest. Further, the spillover considered is not specific to marketing instruments, but is generated by the brand performance (attraction or market share), which is the result of both the firms marketing-mix choice and competitors marketing policies.
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Ojo James Olanipekun and Saidi Adedeji Adelekan
Most aspects of brand loyalty rely heavily on brand awareness. However, the information processing of brand awareness in customers, which is significant in buying decisions or…
Abstract
Most aspects of brand loyalty rely heavily on brand awareness. However, the information processing of brand awareness in customers, which is significant in buying decisions or customers' feedback experiences, is still unknown in the available literature. This study investigates how dynamic brands awareness affect customers in buying what they buy and how they buy them. The current study's entire goal is to comprehend the phenomenon of customer preferences and choices in the Nigerian context. The study asserts that there is a need to provide critical information that will improve customers' hypotheses testing in making a choice and preferences in creating brand awareness. It is necessary for brand builders and marketers to achieve and maintain the ultimate level of awareness through great gift items, pricing tactics, sales promotion, and sponsorship of programmes and events creatively and consistently. Meaningful customer relationship management programmes and activities must be established to constantly improve brand awareness.
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Marcos Inácio Severo de Almeida, Rafael Barreiros Porto and Ricardo Limongi França Coelho
Evolution and stationarity are key time series empirical concepts which need theoretical assessment by extant research. This study presents a model to explain brand sales dynamics…
Abstract
Purpose
Evolution and stationarity are key time series empirical concepts which need theoretical assessment by extant research. This study presents a model to explain brand sales dynamics in emerging markets using two dimensions: sales behavior in time (stationary or evolution) and final position (negative, neutral or positive).
Design/methodology/approach
A three-step methodological approach was performed. First, individual brand sales series were classified (stationarity or evolution) after unit root tests. These series were then regressed against a time variable. These two steps enabled a qualitative classification of six proposed positions, ranging from the worst to the best scenario for marketing managers. A final multinomial model identified the marketing effect to these positions.
Findings
Descriptive statistics reveal an insignificant prevalence of stationary sales series and a small number of positive brand sales series (ascending or promising). The multinomial model shows that price is negatively associated to positive brand sales positions, the important effect of service strategies and how product decisions can lead to an avoidance of negative positions.
Research limitations/implications
The model is limited to short time series of a unique transactional dataset from a multinational energy company based in Brazil.
Practical implications
The research provides a rational empirical framework to managers involved with decisions regarding brand sales dynamics in emerging markets.
Originality/value
The approach advance into the development of models to uncover conditions for market evolution and stationarity in a context marked by the shortage of data.