Measuring The Impact Of Promotions On Brand Switching Under Rational Consumer Behavior
- Topics:
- Brand Management
FREE Registration is required
Overview: Logit choice models have been used extensively to study consumer choice behavior and promotion response. A common finding is that promotion has a strong effect on brand choice. This paper examines whether brand switching elasticities derived from these models may be over-estimated due to rational consumer adjustment of purchase timing to coincide with promotion schedules, and whether this bias can be addressed by a dynamic structural model. It discusses a dynamic structural model of choice/incidence that traces the process by which consumers make optimal buying decisions. This paper conducts three analyses. First is a simulation based on synthetic data. It is shown that if the structural model is correct, brand switching elasticities are over-estimated by stand-alone logit choice models. Reduced form models that try to capture the same phenomena as the dynamic model, especially if they model incidence, can partially, although not completely, address the issue. It discusses the implications of these findings for researchers and managers.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 309KB | Date: Apr 2002 | Pages: 47
