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Econometrics 2014, 2(1), 20-44; doi:10.3390/econometrics2010020
Article

Incorporating Responsiveness to Marketing Efforts in Brand Choice Modeling

,
 and *
Econometric Institute, Erasmus University Rotterdam, H11-2, P.O. Box 1738, Rotterdam NL-3000 DR, The Netherlands
* Author to whom correspondence should be addressed.
Received: 21 October 2013 / Revised: 4 February 2014 / Accepted: 4 February 2014 / Published: 21 February 2014
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Abstract

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 three different datasets, we find better face validity for our parameters. Our model also forecasts better.
Keywords: marketing-instrument effectiveness; heterogeneity; multinomial probit; finite mixtures marketing-instrument effectiveness; heterogeneity; multinomial probit; finite mixtures
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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MDPI and ACS Style

Fok, D.; Paap, R.; Franses, P.H. Incorporating Responsiveness to Marketing Efforts in Brand Choice Modeling. Econometrics 2014, 2, 20-44.

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