A model of consumer buying behavior is used to identify household characteristics that should affect deal proneness. The model treats household purchasing and inventory decisions like those of a firm. In other words, the household's purchasing decisions are assumed to be based on such factors as transaction costs, holding costs, and stockout costs in addition to product price. Household characteristics then are related to these cost parameters to identify households that are likely to be deal prone. The predictions are tested empirically by use of panel data for five frequently purchased products. The empirical results indicate that deal prone households can be identified and that the key variables affecting deal proneness are household resource variables such as home ownership and automobile ownership.
The authors examine the issue of determining the market segments to which a new national brand should be targeted. The usual recommendation is that the new brand should be targeted toward those segments that exhibit considerable brand switching. However, a new national brand should also attempt to attract segments that are loyal to existing national brands as well as segments that primarily purchase private labels. These implications follow from an explicit consideration of the changes in pricing and distribution patterns which occur when a new national brand is introduced. The results are illustrated with a set of diary panel data for facial tissue.
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