Market Response Measurement Using the Multinomial , Multiattribute Logit Choice Model

MARKET RESPONSE MEASUREMENT USING THE MULTINOMIAL, MULTIATTRIBUTE LOGIT CHOICE MODEL by Peter Manning Guadagni Submitted to the Alfred P. Sloan School of Management on May 15, 1980, in partial fulfillment of the requirements for the degree of Master of Science. Universal Product Code (UPC) scanning is the key to a new marketing data source. Unfortunately, most existing marketing models do not have a structure which can utilize the richness of UPC data. A new model is proposed which uses individual purchase choices from members of a UPC scanner panel to measure consumer response to marketing variables. The development and theory of the multinomial logit (MNL) model as well as goodness of fit measures are discussed. An adaptation of the MNL is proposed where multiple purchase choices of a sample of population members are used to get a disaggregately calibrated measure of aggregate response. The model is then tested using UPC panel and sales data from the coffee category. The model performed well enough in this initial implementation to indicate that it may be a useful analysis tool. Specifically, the model was able to measure the impact of price, promotion, and individual consumer loyalties as well as the more subtle effect of a promotional purchase's impact on subsequent buying.