Brand choice dynamics of consumers over their life-time of purchasing in a product category

Carrie Miriam Heilman, Purdue University

Abstract

This study develops a probabilistic model of brand choice that captures dynamic preferences and loyalties of consumers over their life-time of purchasing in a product category (i.e., first ever purchase through to last ever purchase made in a product category). The model is motivated by our theory that choice processes evolve over time, perpetuated by changes in consumer expertise, consumer needs from the product, perceived purchasing risks, and changes in the marketing environment, to name a few. We capture this process through a series of discrete and concurrent choice models spanning a consumer's entire purchasing history, parsimoniously estimated in one model, where each choice model captures consumer preferences for a portion of their duration of time spent in the market. We argue this method of capturing choice over discrete intervals of the choice process is just as good, if not better, than one that analyzes choice over time with a continuous function because (1) our method is more in line with actual marketing implementation plans and consumer response to such tactics, (2) our model is able to capture any "non-linearities" in consumer choice over time, and (3) our model permits a parsimonious analysis of all purchases spanning a consumer's life-time in a category by segmenting the purchasing histories into "stages", and analyzing each stage without having to normalize on any particular stage. The model is calibrated on unique panel data containing the entire purchasing history of panelists in two product categories. We find that preferences and loyalties among certain demographic segments do in fact vary over their duration of purchasing in a category. We also discover that consumers respond differently to price hikes/cuts depending on the length of time they have purchased in a market. Lastly, we find evidence to support the conclusions of previous experimental studies that looked at the long term effect of expertise on choice, but were never validated on actual purchasing data (Meyer and Sathi 1985; Howard and Sheth 1969; and Horsky and Raban 1988). These findings are that consumers with limited information do a considerable amount of brand switching in the early stages of their purchasing process, as part of their information gathering efforts. However, over time and purchasing occasions, as information is gathered, loyalties develop and consumers become more loyal shoppers.

Degree

Ph.D.

Advisors

Bowman, Purdue University.

Subject Area

Marketing|Management

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