Actual Lecture 5 Flashcards
What is the use of sales response models?
Business managers need to know how markets respond to the actions they take.
Provide structural insight on how the brand generates sales, market share, customer awareness or any other variable of interest.
Definition of a sales response model?
Tries to model a sales response as a function of business activities
Internal data + advantages and disadvantages
Comes from the company iteself
Readily available, intra-daily basis, accurate and quick
Only from the company itself - no competitors, no information about psychographics, no info about time of decision
Household scanner data + advantages and disadvantages
Data coming from retail UPC scanners or from the company itself
Available for all major retail chains, daily basis, accurate and quick
- Sampling frame only shops, small shops ma y not be considered, no info about psychographics and time of decision
Annual Reports
Data coming from annual reports of companies
Available for all public companies
- Available only on yearly/quarterly basis, private companies are not considered, no info about psychographics or time of decision
What are three important points we need to take into account when constructing a sales response model?
Inclusion of correct variables is crucial and understanding how they impact sales
Error term - tries to capture unpredictable actions
We also need to consider interaction form
The types of sales response models:
Constant Marginal Returns
Linear model
The types of sales response models:
Decreasing marginal returns
Multiplicative model
Semi-logarithmic model
The types of sales response models:
Saturation volume
Modified exponential model
The types of sales response models:
S-shaped
Log-reciprocal model
Logistic model
The types of sales response models:
Market share models
Multiplicative interaction model
Multinomial logit model
Elasticity?
Change in Quantity Percent/ Change in price %
Price elasticity coefficients?
> 1 Elastic
< 1 Inelastic
Semi-log model
Doesn’t start at a 0 point. Describes a curved line relationship. Examines the interaction between the variables
Elasticity of multiplicative model
ε = α1/beta
Elasticity corresponds to the exponent in the multiplicative model
No need to calculate elasticity
Elasticity of Semi-log model
ε = α1/Q
How is the multiplicative model structured?
Q = kB1B2
What is saturation limit?
The absolute maximum of something. For example, when marketing stops being effective at all.
Elasitcity of Log-reciprocal model
ε = α1/X
Elasitcity of Log-reciprocal model
ε = α1X (Qmax - Q)/Qmax
Difference between log-reciprocal and logistic model
Logistic model has upper limit while the other has no upper limit.
Logistic model?
Can predict only probabilities
Hysteresis effect
If a stimulus is removed, sales do not go back to original level or if they do its extremely slowly
Carry over effect
The possibility that a previous treatement can alter behaviour in a subsequent experimental treatement
