DETERMINING SEGMENTATION IN SALES RESPONSE ACROSS CONSUMER PURCHASE BEHAVIORS

The authors develop a joint estimation approach to segment households on the basis of their response to price and promotion in brand choice, purchase incidence, and purchase quantity decisions. The authors mode l brand choice (what to buy) by multinomial legit, incidence (whether to buy) by nested legit, and quantity (how much to buy) by poisson reg ression. Response segments are determined probabilistically using a la tent mixture model. The approach simultaneously calibrates sales respo nse on two dimensions: across segments and the three purchase behavior s. The procedure permits market-level sales elasticities to be decompo sed by segment and purchase behavior (i.e., choice, incidence, and qua ntity). The authors apply the approach to scanner panel data for the y ogurt category and find substantial differences across segments in the relative impact of the choice, incidence, and quantity decisions on o verall sales response to price.