Incorporating responsiveness to marketing efforts in brand choice modelling

Dennis Fok, Richard Paap and Philip Hans Franses

No EI 2008-15, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

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 tree different datasets, we find better face validity of our parameters. Our model also forecasts better.

Keywords: heterogeneity; marketing-instrument effectiveness; mixtures; multinomial probit (search for similar items in EconPapers)
Date: 2008-08-21
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Journal Article: Incorporating Responsiveness to Marketing Efforts in Brand Choice Modeling (2014)
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