Modeling Category-level Purchase Timing with Brand-level Marketing Variables

Purchase timing of households is usually modeled at the category level. Marketing efforts are however only available at the brand level. Hence, to describe category-level interpurchase times using marketing efforts one has to construct a category-level measure of marketing efforts from the marketing mix of individual brands. In this paper we discuss two standard approaches suggested in the literature to solve this problem, that is, using individual choice shares as weights to average the marketing mix, and the inclusive value approach. Additionally, we propose three alternative novel solutions, which have less limitations than the two standard approaches. The new approaches use brand preferences following from a brand choice model to capture the relevance of the marketing mix of individual brands. One of these approaches integrates the purchase timing model with a brand preference model. To empirically compare the two standard and the three new approaches, we consider household scanner data in three product categories. One of the main conclusions is that the inclusive value approach performs worse than the other approaches. This holds in-sample as well as out-of-sample. The performance of the individual choice share approach is best unless one allows for unobserved heterogeneity in the brand choice models, in which case the three new approaches based on modeled brand preferences are superior. ∗We thank Philip Hans Franses and participants of the Marketing Science conference 2002 in Alberta for helpful comments. All calculations are done using Ox 3.20 (Doornik, 1999). Address for correspondence: D. Fok, Econometric Institute H11-2, Erasmus University Rotterdam, P.O.Box 1738, NL-3000 DR Rotterdam, The Netherlands, e-mail: [email protected]