The Effect of Product Assortment Changes on Customer Retention

Marketing Science, Vol. 24, No. 4, pp. 616-622, 2005

7 Pages Posted: 11 Jun 2007

See all articles by Peter Boatwright

Peter Boatwright

Carnegie Mellon University - David A. Tepper School of Business

Joseph (Jay) B. Kadane

Carngeie Mellon University; Carnegie Mellon University - David A. Tepper School of Business

Joseph Nunes

University of Southern California - Marshall School of Business

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan

Abstract

This research investigates the impact of a large-scale assortment reduction on customer retention, utilizing a model we develop to explore the effect on sales at both the store level and the category level simultaneously. We apply our model to a data set provided by an online grocer. The data contain detailed household purchase records for every category in the store. Our results indicate that the reduction in assortment reduces overall store sales, a result that contrasts with that of all of the recent studies on assortment reductions (Food Marketing Institute. 1993. Variety or duplication: A process to know where you stand. Prepared by Willard Bishop Consulting and Information resources, Inc., in cooperation with Frito Lay; Dr├Ęze, Xavier, Stephen J. Hoch, Mary E. Purk. 1994. Shelf management and space elasticity. J. Retailing 70(4) 301-326; Broniarczyk, Susan M., Wayne D. Hoyer, Leigh McAlister. 1998. Consumers' perceptions of the assortment offered in a grocery category: The impact of item reduction. J. Marketing Res. 35(May) 166-176; Boatwright, Peter, Joseph C. Nunes. 2001. Reducing assortment: An attribute-based approach. J. Marketing 65(July) 50-63; Boatwright, Peter, Joseph C. Nunes. 2004. Correction note for "Reducing assortment: An attribute-based approach." J. Marketing. Forthcoming). We find the reduction had a negative effect on both shopping frequency and purchase quantity, and we find that the decline in shopping frequency resulted in a greater loss than did the reduction in purchase quantities. We also find that the impact of the assortment cut varies widely by category, with less-frequently purchased categories more adversely affected. The variation in the assortment reduction's impact across categories suggests that managers compare select categories in order to moderate the overall loss in sales

Keywords: customer retention, product assortment, efficient assortment, category management, variety

Suggested Citation

Boatwright, Peter and Kadane, Joseph (Jay) B. and Kadane, Joseph (Jay) B. and Nunes, Joseph and Shmueli, Galit, The Effect of Product Assortment Changes on Customer Retention. Marketing Science, Vol. 24, No. 4, pp. 616-622, 2005, Available at SSRN: https://ssrn.com/abstract=991959

Peter Boatwright (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Joseph (Jay) B. Kadane

Carngeie Mellon University ( email )

Department of Statistics
Pittsburgh, PA 15213-3890
United States

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Joseph Nunes

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Galit Shmueli

Institute of Service Science, National Tsing Hua University, Taiwan ( email )

Hsinchu, 30013
Taiwan

HOME PAGE: http://www.iss.nthu.edu.tw

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