A Multimarket Analysis of Inter-dependent Consumer Response Sensitivities

Voleti Sudhir ()
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Voleti Sudhir: Marketing, Indian School of Business, ISB Campus, Gachibowli AC2 L1, 2118, Hyderabad, AP 500032, India

Review of Marketing Science, 2015, vol. 13, issue 1, 59-93

Abstract: We investigate variation in aggregate consumer response sensitivities to the price, promotion and distribution elements of the marketing mix across US metropolitan markets. Primarily, three questions of research interest are examined – (i) the nature of the relationship between different aggregate response sensitivities and the implications therein, (ii) the usefulness of aggregate area-wide macroeconomic indicators such as inflation, unemployment and poverty in the context of a marketing problem, and (iii) the usefulness of geo-spatial information under a distribution-free approach. Beer category sales data across 49 major US metropolitan markets are analyzed. We find a pattern of strong inter-dependence among aggregate response sensitivities that indicates the existence of distinct, non-overlapping consumer segments. This enables a characterization of metropolitan market areas at an aggregate level. Ignoring inter-dependence mis-characterizes response sensitivity in two-thirds of the markets sampled. Further, on a standalone basis, neither area-wide economic indicators nor geo-spatial information help the analysis, but in conjunction, they vastly improve model fit (by almost 40%), explained variance (by over twice), parameter significance and consequently, insight.

Keywords: response sensitivity; simultaneous equation models; spatial analysis; economic indicators; instrumental variables (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/roms-2013-0013

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