Modeling Co-Existing Business Scenarios with Time Series Panel Data

46 Pages Posted: 25 Sep 2007

See all articles by Catarina Sismeiro

Catarina Sismeiro

Imperial College London, Tanaka Business School

Natalie Mizik

University of Washington

Randolph E. Bucklin

UCLA Anderson School of Management

Date Written: February 2006

Abstract

Due to customer segmentation, multiple types of dynamic business scenarios (business-as-usual, escalation, hysteresis, and evolving business practice; Dekimpe and Hanssens 1999) may co-exist within a single product market. The authors develop an approach to model this phenomenon with time series panel data. Unit-root tests are used to group panelists by whether or not outcome (e.g., sales) and marketing activity (e.g., advertising, promotion) variables are stationary or evolving. This produces four clusters corresponding to each business scenario. Next, panel-data vector autoregressive models appropriate for each panelist cluster are estimated to assess the dynamics and the magnitude of the response to marketing effort. The approach is applied to physician panel data on drug prescriptions and direct-to-physician promotions. Estimation results show markedly different response dynamics (as captured by impulse response functions) and elasticities across the physician groups. The approach also produces better in-sample and holdout fits than pooled data models. For firms that track customer-level marketing activity and response over time, a segmentation based on dynamic business scenarios provides a new tool for targeting and efficient marketing resource allocation.

Keywords: Time series analysis, panel data, segmentation, marketing strategy

Suggested Citation

Sismeiro, Catarina and Mizik, Natalie and Bucklin, Randolph E., Modeling Co-Existing Business Scenarios with Time Series Panel Data (February 2006). Available at SSRN: https://ssrn.com/abstract=1016589 or http://dx.doi.org/10.2139/ssrn.1016589

Catarina Sismeiro (Contact Author)

Imperial College London, Tanaka Business School ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Natalie Mizik

University of Washington ( email )

Seattle, WA 98195
United States

Randolph E. Bucklin

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-7339 (Phone)

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