A segment-level hazard approach to studying household purchase timing decisions

The increasing availability of customer-level data and the willingness of marketers to customize the timing of their offers to consumers makes the accurate segment-level description of household purchase timing decisions a compelling issue. In this paper we employ a finite mixture accelerated failure time model to identify and characterize household segments in terms of their purchasing rates and their propensity to accelerate purchases due to marketing mix activities. Such an approach also promises to alleviate possible aggregation problems arising from the use of a common hazard rate for all households. An application to household panel data suggested that infrequent buyers show higher propensity to accelerate than frequent buyers do, and that positive duration effects are underestimated when not accounting for segment-specific hazard rates.