Recovering SKU-level Preferences and Price Sensitivities from Market Share Models Estimated on Item Aggregates
- Topics:
- Pricing Strategy
- Source:
- Knowledge@Wharton
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Overview: Market share models such as the logit and MCI have been used extensively to study the effects of marketing activities on aggregate shares of brands. Many product categories contain a large number of stock keeping units (SKUs) and consist of assortments that change over time. To aid in decisions such as product marketers are interested in measuring preferences and sensitivities to marketing activities at the SKU level. This paper propose an alternative approach to obtaining SKU-level preferences. It distinguish an attribute-level model in which the unit of analysis is the market share for an alternative created by aggregation from a true SKU-level model and develop an analytical relationship between parameters obtained from these two models. Estimation on holdout samples demonstrates superior predictive performance compared with other available methods. Implications for the derivation of SKU-level elasticities and forecasts of market share and price sensitivity for new items introduced to the category are discussed.
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Format: PDF | Size: 510KB | Date: Aug 2003 | Pages: 40
