nep-mkt New Economics Papers
on Marketing
Issue of 2007‒09‒09
five papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. The Price Consideration Model of Brand Choice By Ching, Andrew; Erdem, Tulin; Keane, Michael
  2. Separating Financial From Commercial Customer Churn: A Modeling Step Towards Resolving The Conflict Between The Sales And Credit Department By J. BUREZ; D. VAN DEN POEL
  3. An Empirical Study of Price Dispersion in Homogenous Goods Markets By Thierry Warin; Daniel B. Leiter
  4. Price Points and Price Rigidity By Daniel Levy; Dongwon Lee Author-Workplace-Name: Korea University; Haipeng Allan Chen Author-Workplace-Name: University of Miami, USA; Robert J. Kauffman Author-Workplace-Name: Arizona State University and University of Minnesota, USA; Mark Bergen Author-Workplace-Name: University of Minnesota, USA
  5. Coastal tourism versus inland Portuguese tourism. The Serra da Estrela tourist destination By Vaz, Margarida; Dinis, Anabela

  1. By: Ching, Andrew; Erdem, Tulin; Keane, Michael
    Abstract: The workhorse brand choice models in marketing are the multinomial logit (MNL) and nested multinomial logit (NMNL). These models place strong restrictions on how brand share and purchase incidence price elasticities are related. In this paper, we propose a new model of brand choice, the “price consideration” (PC) model, that allows more flexibility in this relationship. In the PC model, consumers do not observe prices in each period. Every week, a consumer decides whether to consider a category. Only then does he/she look at prices and decide whether and what to buy. Using scanner data, we show the PC model fits much better than MNL or NMNL. Simulations reveal the reason: the PC model provides a vastly superior fit to inter-purchase spells.
    Keywords: Brand Choice; Purchase Incidence; Price Elasticity; Inter-purchase Spell
    JEL: M31 C41 C25
    Date: 2007–08–18
    Abstract: In subscription services, customers who leave the company can be divided into two groups: customers who do not renew their fixed-term contract at the end of that contract, and others who just stop paying during their contract to which they are legally bound. Those two separate processes are often modeled together in a so-called churn-prediction model, but are actually two different processes. The first type of churn can be considered commercial churn, i.e., customers making a studied choice not to renew their subscriptions. The second phenomenon is defined as financial churn, people who stop paying because they can no longer afford the service. The so-called marketing dilemma arises, as conflicting interests exist between the sales and marketing department on the one hand, and the legal and credit department on the other hand. <br>This paper shows that the two different processes mentioned can be separated by using information from the internal database of the company and that previous bad-payment behavior is more important as a driver for financial than for commercial churn. Finally, it is shown on real-life data that one can more accurately predict financial churn than commercial churn (increasing within period as well as out-of-period prediction performance). Conversely, when trying to persuade customers to stay with the company, the impact of ‘loyalty’ actions is far greater with potential commercial churners as compared to financial churners. Evidence comes from a real-life field experiment.
    Keywords: Customer Intelligence, analytical customer relationship management (aCRM), customer churn, attrition research, commercial churn, financial churn, credit risk, out-of-period validation
    Date: 2007–08
  3. By: Thierry Warin; Daniel B. Leiter
    Abstract: This paper presents the results of an empirical study of price dispersion in homogeneous goods markets. Modern economic theory suggests that inevitable asymmetries of information in markets lead to an equilibrium in which price dispersion is present even when goods are perfectly homogenous. In this paper we present an empirical analysis in which we employ both cross-sectional and time-series data gathered directly from, one of the most popular and comprehensive online shopping/price-comparison sites on the Internet. In particular our analysis focuses on (i) the effect that the number of firms offering a good has on price dispersion, (ii) the informational value to the consumer of using the Pricegrabber website, and (iii) the persistency of price dispersion over time.
    Keywords: E-commerce, Internet marketing, Price dispersion, Signaling, Search Cost, Gatekeepers, Regression and other statistical techniques JEL Classification: L81, L86, L11
    Date: 2007–10
  4. By: Daniel Levy (Bar-Ilan University, Israel and Emory University, USA and Rimini Centre for Economic Analysis, Rimini, Italy); Dongwon Lee Author-Workplace-Name: Korea University; Haipeng Allan Chen Author-Workplace-Name: University of Miami, USA; Robert J. Kauffman Author-Workplace-Name: Arizona State University and University of Minnesota, USA; Mark Bergen Author-Workplace-Name: University of Minnesota, USA
    Abstract: We offer new evidence on the link between price points and price rigidity using two datasets. One is a large weekly transaction price dataset, covering 29 product categories over an eight-year period from a large U.S. supermarket chain. The other is from the Internet, and includes daily prices over a two-year period for 474 consumer electronic goods covering ten product categories, from 293 different Internet retailers. Across the two datasets, we find that (i) 9 is the most frequently used price-ending for the penny, dime, dollar and the ten-dollar digits, (ii) the most common price changes are in multiples of dimes, dollars, and ten-dollars, (iii) 9-ending prices are at least 24% (and as much as 73%) less likely to change in comparison to prices ending with other digits, and (iv) the average size of the price change is higher if the price ends with 9 in comparison to non-9-ending prices. This link between price points and price rigidity is robust across a wide range of prices, products, product categories, and retail formats. We offer a behavioral explanation for the findings.
    Date: 2007–07
  5. By: Vaz, Margarida; Dinis, Anabela
    Abstract: This article looks at the Serra da Estrela mountain range as a tourist destination in the context of the inland Portuguese tourist destinations, identifying its direct competitors as well those that complement its tourism offer. We note the changes in national tourist dynamics, with the inland regions growing at a faster rate than the coastal ones. As a tourist destination the Serra da Estrela could benefit from having the Douro (whose growth is greater) and the Central Alentejo regions (the more established inland destination) as allies. Furthermore, the Serra da Estrela needs to increase its competitive profile to compete with the Trás-os-Montes region, which presents similar competitive arguments (rural and mountain destination).
    Keywords: Coastal tourist destinations; inland tourist destinations; comparative advantages; competitive advantages; territorial marketing.
    JEL: R11 M3 L83
    Date: 2007

This nep-mkt issue is ©2007 by Joao Carlos Correia Leitao. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.