Effects of Brand Preference, Product Attributes, and Marketing Mix Variables in Technology Product Markets

Sriram, S.; Chintagunta, Pradeep K.; Neelamegham, Ramya
September 2006
Marketing Science;Sep/Oct2006, Vol. 25 Issue 5, p440
Academic Journal
We develop a demand model for technology products that captures the effect of changes in the portfolio of models offered by a brand as well as the influence of the dynamics in its intrinsic preference on that brand's performance. To account for the potential correlation in the preferences of models offered by a particular brand, we use a nested logit model with the brand (e.g., Sony) at the upper level and its various models (e.g.,Mavica, FD, DSC, etc.) at the lower level of the nest. Relative model preferences are captured via their attributes and prices. We allow for heterogeneity across consumers in their preferences for these attributes and in their price sensitivities in addition to heterogeneity in consumers' intrinsic brand preferences. Together with the nested logit assumption, this allows for a flexible substitution pattern across models at the aggregate level. The attractiveness of a brand's product line changes over time with entry and exit of new models and with changes in attribute and price levels. To allow for time-varying intrinsic brand preferences, we use a state-space model based on the Kalman filter, which captures the influence of marketing actions such as brand-level advertising on the dynamics of intrinsic brand preferences. Hence, the proposed model accounts for the effects of brand preferences, model attributes and marketing mix variables on consumer choice. First, we carry out a simulation study to ensure that our estimation procedure is able to recover the true parameters generating the data. Then,we estimate our model parameters on data for the U.S. digital camera market. Overall, we find that the affect of dynamics in the intrinsic brand preference is greater than the corresponding effect of the dynamics in the brand's product line attractiveness. Assuming plausible profit margins, we evaluate the effect of increasing the advertising expenditures for the largest and the smallest brands in this category and find that these brands can increase their profitability by increasing their advertising expenditures. We also analyze the impact of modifying a camera model's attributes on its profits. Such an analysis could potentially be used to evaluate if product development efforts would be profitable.


Related Articles

  • Measuring goodness of fit for the double-bounded logit model. Kanninen, Barbara J.; Khawaja, M. Sami // American Journal of Agricultural Economics;Nov95, Vol. 77 Issue 4, p885 

    Addresses the question of measuring the goodness of fit of double-bounded logit models. Examination of the `sequential classification procedure'; Features of the `sequential classification procedure'; Review of the double-bounded logit model; Contingent valuation and willingness to pay for...

  • How Vodafone used science to optimise its marketing spend. Roderick, Leonie // Marketing Week (Online Edition);11/5/2015, p3 

    The article reports on the use of science by Vodafone to enhance its brand strategy. Topics covered include the econometric models to address the correlation between sales and advertising spending. Also mentioned is the importance of such models to optimize the marketing spending of the...

  • Kalman Filter Estimation of New Product Diffusion Models. Xie, JinHong; Song, X. Michael; Sirbu, Marvin; Wang, Qiong // Journal of Marketing Research (JMR);Aug1997, Vol. 34 Issue 3, p378 

    The authors introduce a new estimation procedure, Augmented Kalman Fiiter with Continuous State and Discrete Observations (AKF(C- D)), for estimating diffusion models. This method is directly applicable to differential diffusion models without imposing constraints on the model structure or the...

  • Brand management and the marketing mix model. Cain, Peter M // Journal of Marketing Analytics;Mar2014, Vol. 2 Issue 1, p33 

    Brand management is typically defined as the way in which brands are positioned in the marketplace, both in terms of tangibles such as price, packaging and the marketing mix and intangibles such as consumer perceptions and brand equity. The conventional marketing mix model is often used to...

  • Modeling and forecasting international tourism demand for Tunisia: A time varying parameter approach. Hathroubi, Salem // Interdisciplinary Journal of Contemporary Research in Business;Nov2011, Vol. 3 Issue 7, p261 

    The aim of this paper is to estimate and forecast the international tourism demand for Tunisia. First, we study the importance of tourism for Tunisian economy. Then, we identify the factors that explain the demand for international tourism for Tunisia. The demand is measured by the number of...

  • Building Brand Awareness in Dynamic Oligopoly Markets. Naik, Prasad A.; Prasad, Ashutosh; Sethi, Suresh P. // Management Science;Jan2008, Vol. 54 Issue 1, p129 

    Companies spend hundreds of millions of dollars annually on advertising to build and maintain awareness for their brands in competitive markets. However, awareness formation models in the marketing literature ignore the role of competition. Consequently, we lack both the empirical knowledge and...

  • An econometric analysis of the effects of market liberalization on price dynamics and price volatility. Chavas, Jean-Paul; Kim, Kwansoo // Empirical Economics;Feb2006, Vol. 31 Issue 1, p65 

    The paper investigates price dynamics under market liberalization, with a focus on the effects of lowering price floors. We analyze price dynamics by specifying and estimating a dynamic Tobit model under time-varying volatility, where the market price is censored by a government-set support...

  • La dinámica del empleo en la frontera norte de Uruguay. Alsina, Fernando Correa // Estudios Fronterizos;ene-jun2011, Vol. 12 Issue 23, p79 

    Uruguay shares a long border with Brazil. There, inhabitants from both sides of the border shop in whichever country they find the cheapest prices. As a consequence of severe changes in the bilateral real exchange rate, the demand moves alternately from side to the other of the border, affecting...

  • Paying more and getting less in this brave new world.  // Graham Leader;1/20/2013, Vol. 137 Issue 45, p4A 

    The author focuses on increasing market prices of various commercial goods in the current world.


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics