Product perishability and multistore grocery shopping

Perishability, a largely unconsidered characteristic of consumer goods, is shown to play an important role in planned multistore shopping behavior. We present a model of consumers as cost minimizing inventory managers, who choose between two stores differentiated on location and price, and who purchase perishable and nonperishable goods. We show that the interaction between perishability of goods and price differences of stores can be an important driving force for planned multistore shopping. This rationale leads to a set of propositions. One unexpected result is that as the known price difference on a basket of identical goods increases between two stores, shoppers making store choice decisions on the basis of the basket price are more likely to shop regularly at both stores. We present survey results supporting our model's predictions

Spatial competition and nonlinear responses in marketing

Spatial competition, in the context of industry-wide changes in retailing formats and strategies, is addressed in this dissertation from a theoretical modelling perspective. Chapter2 develops a normative individual choice model to explore how "power retailers" affect grocery shopping behaviour, and, consequently, market share. Power retailers are very large retail outlets that compete primarily on price, and are known variously as warehouse clubs, category killers, and superstores. The model shows that consideration of consumer stockpiling can lead to an "increasing returns" nonlinear response of market share to price reductions, and that the effect is not noticeable when competitors have small price differences. The model also differentiates between perishable and nonperishable goods, and shows that this may drive planned multistore shopping. Chapter 3 starts with the observation that competent management in many sectors of retailing, including grocery retailing, requires an ability to respond quickly and effectively to unexpected adversity. This dynamic is included in an oligopolistic spatial interaction model, and the system is shown to evolve to a novel and robust stochastic steady state known as self-organized criticality (SOC). One characteristic of the SOC state is that it allows small exogenous shocks to produce large responses at a rate greater than would be expected if the law of large numbers applied. This work represents the first known investigation of SOC in a marketing setting.Business, Sauder School ofGraduat

Promotion thresholds : price change insensitivity or risk hurdle?

Threshold effects in consumer response to price promotions have been conceptualized as reduced customer sensitivity to differences between an observed price and an internal reference price when those differences are small. In this research, we develop an alternate mechanism whereby the threshold effect arises from consumer uncertainty of reference price, rather than from insensitivity to small gains and losses. We compare two variations of this mechanism with the usual insensitivity-based promotion threshold mechanism. We find that one of the uncertainty mechanisms, where the threshold results from a history-dependent risk hurdle, has particularly desirable theoretical and empirical characteristics. The implications are, first, that apparent threshold effects may arise more from uncertainty of the reference price and risk aversion than from insensitivity to small price changes. Promotion strategies that assume insensitivity to small changes may therefore be problematic. Second, for both positive and negative transaction utilities, the consumer may feel overall gain when making a purchase even if there is a transaction loss. Finally, customers' purchase timing histories may have an impact on deal response through risk-hurdle induced threshold levels

Customer and business analytics : applied data mining for business decision making using R

xxvi, 289 p.; 25 c