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http://ssrn.com/abstract=370904
 
 

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Incorporating Responsiveness to Marketing Efforts When Modeling Brand Choice


D. Fok


Econometric Institute - Erasmus University Rotterdam; Erasmus Research Institute of Management (ERIM); Tinbergen Institute Rotterdam

Philip Hans Franses


Erasmus University Rotterdam (EUR) - Department of Econometrics

Richard Paap


Erasmus University Rotterdam (EUR) - Department of Econometrics; Tinbergen Institute; Erasmus Research Institute of Management (ERIM)

15 2001 8,

ERIM Report Series Reference No. ERS-2001-47-MKT

Abstract:     
In this paper we put forward a brand choice model which incorporates responsiveness to marketing efforts as a form of structural heterogeneity. We introduce two latent segments of households. The households in the first segment are 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 responsiveness states over time.We compare the in- and out-of-sample performance of our model with various versions of the MNL model. We conclude that, while using the smallest amount of parameters, our model outperforms all MNL variants on forecasting. This, together with the face validity of our parameter results, leads us to believe that incorporating responsiveness seems to be a worthwhile exercise.

Number of Pages in PDF File: 28

Keywords: Marketing-instrument effectiveness, structural heterogeneity, state dependence, multinomial logit, mixtures

JEL Classification: M, M31, C44

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Date posted: February 21, 2003  

Suggested Citation

Fok, D. and Franses, Philip Hans and Paap, Richard, Incorporating Responsiveness to Marketing Efforts When Modeling Brand Choice (15 2001 8,). ERIM Report Series Reference No. ERS-2001-47-MKT. Available at SSRN: http://ssrn.com/abstract=370904

Contact Information

Dennis Fok (Contact Author)
Econometric Institute - Erasmus University Rotterdam ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Erasmus Research Institute of Management (ERIM) ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1333 (Phone)
+31 10 408 9162 (Fax)
Tinbergen Institute Rotterdam ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Philip Hans Franses
Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1278 (Phone)
+31 10 408 9162 (Fax)
Richard Paap
Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Tinbergen Institute ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Erasmus Research Institute of Management (ERIM) ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
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