A simultaneous model of multiple-discrete choices of variety and quantity

In many categories, consumers purchase discrete quantities of multiple varieties. For example, when doing grocery shopping for cereals, consumers may purchase in each category three units of brand A, four of brand B, and one of brand C. These decisions are often influenced by nonlinear pricing strategies such as quantity discounts. Modeling such multiple-discrete choices is challenging, as they violate assumptions of standard choice models. In this research, the author introduces a computationally attractive choice model that simultaneously captures 1) variety, 2) discrete quantity, and 3) nonlinear pricing strategies, such as quantity discounts. The model assumes that consumers maximize variety of the choice outcome, while taking into account constraints on utilities of alternatives. Application of the proposed model to two datasets demonstrates the superior fit compared to several rival models. Counterfactual analyses demonstrate that the model is a valuable tool for assortment and pricing decisions.     

An Analysis of Assortment Choice in Grocery Retailing

Consumers in grocery retailing commonly buy bundles of products to accommodate current and future consumption. When all products in a particular bundle share common attributes (and are selected from the same product category), the consumer is said to assemble an assortment. This research examines the impact of assortment variety on the assortment choice process. In particular, we test the prediction that consumers demand less variety for higher quality items. To investigate this relationship, we employ a flexible choice model, suitable for the analysis of assortment choice. The model, based upon the assumption that the utility of purchase of one item in an assortment depends upon the set of items already selected, allows for a general utility structure across the assortment items. We apply the model to household assortment choice histories from the yogurt product category. Substantively, we show that yogurt choice is affected by brand quality perceptions (quality-tier competition). Moreover, we show that reaction to reductions in variety (number of yogurt flavors) is mediated by brand quality perceptions. Taken together, these empirical facts paint a picture of a consumer who is willing to trade-off variety against product quality in assortment choice.     

What Drives Household Choice of Organic Products in Grocery Stores?

This paper studies how households choose organic products on a given store visit. We develop a three-stage purchase incidence/brand choice/purchase quantity model for organic products. Shared random effects parameters link the three stages of the model. We empirically quantify the effects of category variables, marketing mix, and demographic variables on the purchase of organic products using a unique household panel dataset that includes actual organic purchase data from two markets, by over 4,500 households in 25 stores for the period between January 2004 and June 2009. First, we find that the purchase of organic products is greater among the high income, college educated, and older families as well as among consumers holding high-level occupations. Second, households tend not to purchase organic products when buying in concentrated categories. Third, on average, households tend to buy organic store brands more than the organic national brands. Promotions of organic brands (feature ad and display) are less likely to drive households to buy organic brands and so does the organic brand's distribution breadth. Finally, price has an inverted U-shaped effect. We discuss the implications of these results for retailers, manufacturers and researchers.     

Understanding the impact of store flyers on purchase behaviour: An empirical analysis in the context of Spanish households

The purpose of this paper is to analyse how Spanish consumers are really influenced by store flyers. The present study examines decisions of households regarding: (i) incidence (using a binary logit model); (ii) brand choice (using a multinomial logit model); and (iii) quantity (using a Poisson model). The models described above are applied to scanner choice datasets of the purchases made by Spanish households in two product categories (olive oil and coffee) over 53 weeks. The study finds that the main effect of such flyers is brand switching, rather than acceleration or stockpiling. However, consumers are not homogeneous in these responses to store flyers. Price sensitivity is found to be a more important driver of flyer-proneness than brand loyalty; moreover, the study finds a strong relationship between price-sensitive, flyer-prone consumers and decisions on incidence, choice, and purchase quantities. In contrast, the influence of the presence of brands in store flyers on incidence of purchases is not more prevalent among brand-loyal consumers than among non-brand-loyal consumer; however, such flyers are able to induce loyal users to stock up on their preferred brand. The managerial implications underline that manufacturers and retailers should be aware that the inclusion of a brand in store flyers (without necessarily offering a price discount) can simultaneously cut promotional costs and increase sales profits. In addition, managers should use other types of promotions (such as in-store displays) to encourage consumers to stock up on the brand.     

The impact of social media conversations on consumer brand choices

This paper estimates the impact of social media conversations on consumer valuation of brand characteristics and demand for carbonated soft drinks (CSDs). We formulate a random coefficient, discrete choice model of consumer demand that includes social media conversations, and estimate it matching Nielsen sales data on carbonated soft drinks to social media conversations on Facebook, Twitter, and YouTube. Empirical results indicate that consumers’ conversations about brands and nutritional aspects of CSDs have a significant impact on their valuation of brand characteristics and ultimately on their choices of CSDs. These findings have important implications not only for firms using social media as a strategic tool for effective brand promotion and product design but also for public health policies aimed at reducing the consumption of sugary beverages and high-calorie foods.     

Quantity of Information and Information Display Type as Predictors of Consumer Choice of Product Brands

Research has shown that consumers like large quantities of product information and believe that it helps them to make better purchase decisions. In light of this finding, it is quite possible that consumers might make brand choice decisions based on the amount of information provided. In cases where brands differ in amount of information, consumers may choose those brands that provide the most information. This article reports the results of exploratory research designed to examine this question as well as the effects of two information display types on brand choice in situations of varying information quantity. The findings revealed evidence to support the hypothesized consumer preference for high-information brands over low-information brands. The magnitude of the effect was also found to differ by type of information display.     

Means matter, but variance matter too: Decomposing response latency influences on variance heterogeneity in stated preference experiments

Response time latencies have been shown to influence consumer’s choice behaviour in choice-based-conjoint studies. The literature has shown that response time latencies affect the mean outputs of parameter estimates derived from models of discrete choice. In this paper, we add further insight into the influences response time latencies have on such models by modelling latent response information associated with the variance of random parameter distributions through parameterisation of variance heterogeneity (or heteroskedasticity). We demonstrate that response time latencies influence not only the means of random parameter distributions, but also the variances, and that failure to account for both may result in incorrect model inferences being drawn.     

The Indirect Impact of Price Deals on Households’ Purchase Decisions Through the Formation of Expected Future Prices

We examine the indirect impact of price deals, which occurs through the formation of expected future prices, on households’ purchase decisions. Two competing learning processes of households’ formation of expected future deals that lead to opposite predictions are proposed. Under a deal-probability learning process, a current deal on a brand raises households’ expectations of a deal on the same brand in the immediate future, while under a deal-timing learning process, a current deal on a brand lowers households’ expectations of a deal on the same brand. We embed each learning specification within a comprehensive econometric framework that simultaneously examines three purchase decisions – incidence, brand choice and quantity – at the household level, while explicitly correcting for two sources of selectivity bias in discrete quantity outcomes. We estimate the proposed model using scanner panel data on paper towels, and find that (1) the deal-probability learning process better describes how households incorporate the deal information into the formation of future price expectations compared to the deal-timing learning process; (2) the indirect impact of price deals is greater for brand-loyals than for brand-switchers; (3) the indirect impact of price deals is greater for larger families, heavy users, less educated and less employed households, and infrequent shoppers. We also show that ignoring the indirect impact of price deals severely overstates the sales effects.     

How Do Customers Alter Their Basket Composition When They Perceive the Retail Store to Be Crowded? An Empirical Study

Using data from a large-scale field study, we show that (perceptions of) crowding change(s) the composition of a consumer's shopping basket. Specifically, as shoppers experience more crowding, their shopping basket contains (a) relatively more affect-rich (“hedonic”) products, and (b) relatively more national brands. We offer a plausible dual-process explanation for this phenomenon: Crowding induced distraction limits cognitive capacity, increasing the relative impact of affective responses in purchase decisions. As we are the first to show that level of crowding relates to what shoppers buy (at both product and brand level), the implications of these effects for retailers are discussed.     

Premium generic brand (PGB) choice vis-à-vis generic and national brands: A scenario comparison for self-use,family consumption and gift giving in a food versus non-food and cross-cultural context

PurposeThe study models factors affecting brand category choice for generic as well as national brands, and next contrasts them to a new brand category: premium generic brands (PGB). PGB are a new occurrence in brand and product management, and consumer reactions to PGB are not yet well understood.Design/methodology/approachThree purchase motivation scenarios were presented to 553 consumers to test for their purchase intentions for self-consumption, family use or gift giving. A quasi-experiment was chosen where respondents were exposed to store-like presentations of actual real life products and asked for their likelihood to choose the national or generic brand over the new PGB. The study applied multivariate testing such as MANOVA.FindingsSeparate models were developed for food and non-food choice through backward deletion regression analyses, and the most parsimonious models revealed strong similarities for self as well as family consumption choices, but distinct drivers for gifts. Value for money, image and satisfaction are key factors in brand choice overall, but for gifts, ‘image’ overpowers all other predictors.Originality/valueThe study identified the Chinese as a distinct consumer segment for brand choice since they are more open to potentially consider PGB as gifts, whereas Caucasians only buy national brands for gift giving.     

Quantity Surcharges on Groceries

A quantity surcharge exists when the unit cost of a given brand is higher for a large package than for a small one. This paper examines some product and household characteristics that influence observed quantity surcharging practices. Results indicate that the propensity to buy a large package of a product is positively influenced by the extent of a household's usage of that product, procurement cost, and carrying capacity and is negatively influenced by the propensity to price search. A retailer's decision to levy a quantity surcharge is, in turn, influenced by demand for the product, the propensity to buy large packages, and to some extent the product's carrying cost.     

A method to infer coupon availability from coupon redemption in the supermarket scanner panel data

Measuring the impact of coupon availability on consumers’ purchase decisions often poses a problem in forecasting market shares of brands in a retail environment. Because, data on actual coupon availability do not exist or can only be obtained by costly field experiments. The widely used supermarket scanner panel data sets offer information on coupons redeemed by the household for only the specific brand that is bought. However, using the redemption variable introduces bias in brand choice or purchase incidence models because redeeming a coupon implies buying the brand or making the purchase. This study presents a way to infer availability from coupon redemption data and to predict market shares for each brand in a supermarket product category.     

Modeling Dependencies in Brand Choice Outcomes Across Complementary Categories

We build an econometric model of a household's contemporaneous brand choice outcomes in complementary product categories. This model explicitly captures cross-category dependencies in brand choice outcomes of a household. Such dependencies have not been modeled in existing multi-category demand models.Our model accommodates cross-category dependencies that arise on account of three component effects: (1) complementarity due to the additional utility that a household derives from the joint purchase of brands in complementary categories, (2) marketing spillovers due to the effects of brands’ prices in one category affecting the households’ latent utilities for brands in the complementary category, (3) unobserved dependencies due to correlations in households’ latent utilities for brands across categories.We estimate our proposed multi-category brand choice model using scanner panel data on cake mix and frosting categories. We find that complementarity accounts for the vast majority of the estimated cross-category effects in demand. We also find that as much as 55 percent of the total retail profit impact of price promotions arise on account of brand-level (focus of our study), as opposed to category-level (focus of previous studies), dependencies in household demand. Finally, we propose an easily interpretable visual representation – Largess and Free-Ride Plot – of cross-category price elasticities that summarizes the differential abilities of brands to influence, or be influenced by, brands in the complementary category.     

Cigarette pack and advertising displays at point of purchase: community demand for restrictions

Tobacco promotion influences tobacco consumption. Traditional forms of tobacco promotion have been heavily restricted in response to the harmful effects of tobacco. Tobacco displays at the point of purchase are increasingly important as a means of communicating brand imagery for the tobacco industry, especially when advertising is restricted at these points. Previous research has demonstrated that children exposed to tobacco advertising at the point of purchase have inflated perceptions of availability, use and popularity of tobacco. Internationally, laws are being debated and implemented to prohibit or restrict the display of tobacco at the point of purchase or put tobacco out of sight. Such measures would reduce tobacco product exposure and, hence, tobacco marketing among youth and the community. In South Australia, a ban on all cigarette advertising at the point of purchase was introduced in 2005. This study was designed to assess community support for restrictions on cigarette displays and advertising at the point of purchase. A telephone survey was conducted with a random sample of 2026 South Australian adults (aged 18 years and over) in July 2005. Overall, 63% of the community approved of a hypothetical total ban on cigarette displays at the point of purchase, with over three‐quarters believing this should happen in the next 12 months. A further 24% believed that cigarette displays should be restricted and 82% would approve of a ban on displays in stores that sell confectionary. Only 7% of adult smokers reported making their decision about the brand of cigarettes to buy at the point of purchase and 90% made their decision before they even entered the shop. The results strengthen arguments that cigarette displays are not necessary to maintain brand loyalty or to encourage brand switching of established smokers. Instead, the results make arguments more credible that cigarette displays normalize and promote smoking among young people and may also promote unplanned purchase or increased consumption among less frequent smokers or former smokers. Placing cigarettes out of sight would be unlikely to impact on brand choice for most smokers, who have already made up their mind before they enter the store.     

Individual differences in price responsiveness within and across food brands

Various researchers have reported that in routine grocery shopping the quantity consumers buy varies little across shopping occasions. Even in the presence of promotions, the largest part of promotional sales peaks has been attributed to brand switching. Recent investigations, however, indicated that the quantity consumers buy may include complex intra- and inter-consumer and intra- and inter-brand choice patterns. Using panel data from more than 1500 British consumers purchasing four food products during 52 weeks, the present study examined whether such complex patterns occur and assessed their relative contribution to overall quantity elasticity. Results showed that consumers buy larger quantities when paying lower prices, both within and across brands, and that consumers who buy larger quantities tend to pay lower prices, both within and across brands. The results also indicated that intra-brand price variations, especially those associated with consumers switching across package sizes, account for the largest portion of changes in quantity. Methodological differences might explain discrepancies among previous findings such as the duration of the sample used, the number of brands examined, and the conceptualization of a brand as including or excluding different package sizes.     

Effects of prior brand usage and promotion on consumer promotional response

We examine how prior purchases influence consumer response to promotional activity in brand choice decisions. To improve understanding of the nature of this influence, we separate previous purchases into those on promotion and those not on promotion, and consider their differential impact on subsequent brand choices. Impact may be observed at the brand level, category level, or both and we suggest circumstances in which each might occur. Across four product categories, consumer sensitivity to price, price promotions, and feature advertisements increases for all brands in the product category following a promotional purchase but also decreases for the most recently purchased brand. The magnitudes of the results indicate that prior promotional purchases influence choice more than prior brand usage does. We offer managerial recommendations regarding promotional activities, for both retailers and manufacturers.     

A Multiple-discrete/Continuous Model of Price Promotion

Understanding the effect of temporary price reductions, or price promotions, on sales of consumer packaged goods is an area of ongoing interest, both in academia and in practice. Price promotions, however, are becoming an increasingly important method of managing consumer demand for fresh produce items. Modeling the impact of price promotions must take into account the differentiated nature of fresh produce and the fact that consumers tend to purchase multiple items of only a few of the products available to them. Neither a continuous nor a discrete model of demand is appropriate. In this paper, we apply a multiple-discrete/continuous model of fresh produce demand to study the impact of price promotion on retail apple sales. Our findings show that the brand switching/category incidence effect of promotion is closer to 65/35 than the more usual 80/20 rule (80 percent of the effect is brand switching and 20 percent purchase incidence) when the nature of the decision is appropriately taken into consideration.     

Children and advergames: the role of product involvement,prior brand attitude,persuasion knowledge and game attitude in purchase intentions and changing attitudes

The central aim of this study is to build upon previous research by investigating the role of product involvement, prior brand attitude, persuasion knowledge and game attitude in the brand attitude changes and purchase intentions of children after playing an advergame. In all, 279 respondents between the ages of 10 and 12 years participated in the study. First, they were asked to complete a pre-test survey addressing product involvement and prior brand attitude towards several products and brands. Two weeks later, the respondents were asked to play an advergame and complete a survey addressing brand attitude, purchase intention, persuasion knowledge and attitude towards the game. Our analysis reveals that a positive attitude change is more likely when the game player has already evaluated the brand positively. Furthermore, game attitude is positively related to attitude changes towards the advertised brands, consistent with affect transfer theory. Counterintuitively, a higher level of persuasion knowledge is associated with a higher intention to buy the advertised product. Finally, children who had a more positive attitude towards the game were more likely to report higher purchase intentions, indicating that games which provide good experiences positively influence behavioural intentions. We conclude the paper by discussing the study's limitations and suggestions for future research.     

What drives consumers to customize products? The mediating role of brand experience

Brands are increasingly seeking ways to engage consumers in deep and meaningful brand experiences. As technological advances have developed, brands have an increasing arsenal to draw on in creating brand experience. One increasingly common tactic is product customization, whereby consumers are provided the ability to create their own products from a set of options. With this study, we seek to understand the mediating role of brand experience in consumer decisions to customize products. Specifically, we investigate the interplay of non-brand drivers (those intrinsic to the consumer) and brand drivers (those extrinsic to the consumer) in the context of customization. In doing so, we develop an understanding of consumers' intention to use a customization toolkit and their subsequent intention to purchase customized products. We find brand experience drives intention to use a customization toolkit, mediating the relationship between individual factors and usage intentions. A customer's prior experience and their intention to use a customization toolkit are also direct drivers of customized product purchase intention.