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.

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Erasmus Research Institute of Management
hdl.handle.net/1765/110
ERIM Report Series Research in Management
Erasmus Research Institute of Management

Fok, D, Franses, Ph.H.B.F, & Paap, R. (2001). Incorporating Responsiveness to Marketing Efforts When Modeling Brand Choice (No. ERS-2001-47-MKT). ERIM Report Series Research in Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/110