We put forward a brand choice model with unobserved heterogeneity that concerns responsiveness to marketing efforts. We introduce two latent segments of households. The first segment is 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 the two responsiveness states over time. When comparing the performance of our model with alternative choice models that account for various forms of heterogeneity for tree different datasets, we find better face validity of our parameters. Our model also forecasts better.

Additional Metadata
Keywords heterogeneity, marketing-instrument effectiveness, mixtures, multinomial probit
Publisher Erasmus School of Economics
Persistent URL hdl.handle.net/1765/13051
Series Econometric Institute Research Papers
Journal Report / Econometric Institute, Erasmus University Rotterdam
Citation
Fok, D, Paap, R, & Franses, Ph.H.B.F. (2008). Incorporating responsiveness to marketing efforts in brand choice modelling (No. EI 2008-15). Report / Econometric Institute, Erasmus University Rotterdam (pp. 1–32). Erasmus School of Economics. Retrieved from http://hdl.handle.net/1765/13051