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Incorporating Responsiveness to Marketing Efforts in Brand Choice Modeling

Author

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  • Dennis Fok

    (Econometric Institute, Erasmus University Rotterdam, H11-2, P.O. Box 1738, Rotterdam NL-3000 DR, The Netherlands)

  • Richard Paap

    (Econometric Institute, Erasmus University Rotterdam, H11-2, P.O. Box 1738, Rotterdam NL-3000 DR, The Netherlands)

  • Philip Hans Franses

    (Econometric Institute, Erasmus University Rotterdam, H11-2, P.O. Box 1738, Rotterdam NL-3000 DR, The Netherlands)

Abstract

We put forward a brand choice model with unobserved heterogeneity that concerns responsiveness to marketing efforts. We introduce two latent segments of households. The first segment is assumed to respond to marketing efforts, while households in the second segment do not do so. Whether a specific household is a member of the first or the second segment at a specific purchase occasion is described by household-specific characteristics and characteristics concerning buying behavior. Households may switch between the two responsiveness states over time. When comparing the performance of our model with alternative choice models that account for various forms of heterogeneity for three different datasets, we find better face validity for our parameters. Our model also forecasts better.

Suggested Citation

  • Dennis Fok & Richard Paap & Philip Hans Franses, 2014. "Incorporating Responsiveness to Marketing Efforts in Brand Choice Modeling," Econometrics, MDPI, vol. 2(1), pages 1-25, February.
    • Handle: RePEc:gam:jecnmx:v:2:y:2014:i:1:p:20-44:d:33259
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    marketing-instrument effectiveness; heterogeneity; multinomial probit; finite mixtures;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C - Mathematical and Quantitative Methods
    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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