Measuring the Lifetime Value of a Customer in the Consumer Packaged Goods (CPG) industry

In this study, we propose a flexible framework to assess Customer Lifetime Value (CLV) in the Consumer Packaged Goods (CPG) context. We address the substantive and modeling challenges that arise in this setting, namely (a) multiple-discreteness, (b) brand-switching, and (c) budget constrained consumption. Using a Bayesian estimation, we are also able to infer the consumer’s latent budgetary constraint using only transaction information, thus enabling managers to understand the customer’s budgetary constraint without having to survey or depend on aggregate measures of budget constraints. Using the proposed framework, CPG manufacturers can assess CLV at the focal brand-level as well as at the category-level, a departure from CLV literature which has mostly been firm-centric. We implement the proposed model on panel data in the carbonated beverages category and showcase the benefits of the proposed model over simpler heuristics as well as conventional CLV approaches. Finally, we conduct two policy simulations describing the role of the budget constraint on CLV as well as the asymmetric effects of pricing in this setting and develop managerial insights in this context

Societal Spillovers of TV Advertising: Social Distancing During a Public Health Crisis

Can TV advertising affect societal outcomes beyond traditional marketing outcomes such as sales and brand awareness? The authors address this question in the context of the COVID-19 pandemic by analyzing daily advertising and mobility data for 2,194 counties across 204 designated market areas in the United States. By employing a border identification strategy that exploits discontinuities across television markets, the authors find a significant positive causal relationship between TV ads from brands containing COVID-19 narratives and people\u27s social distancing behavior, while controlling for government policy interventions (e.g., shelter-in-place, mask mandates). The estimated effects are almost 11 times larger in counties without government policy interventions compared with counties with policy interventions. Notably, while the overall impact of government ads on social distancing behavior is nonsignificant, the effect becomes significantly negative (positive) in the presence (absence) of policy interventions. The results are robust to alternative model specifications, variable operationalizations, and other data considerations. The findings underscore the critical role that spillover effects from brand-sponsored TV ads can play during major public crises, including mitigating the lack of local governments\u27 policy interventions. The findings bear substantive implications for managers and policy makers regarding how advertising strategies may help improve public health outcomes or advance social good