Chapter 4

Question 1

Why do consumers buy from a repertoire of brands?

Answer 1

• complete awareness is impossible
• buyers seek variety
• buyers buy for different occasions/purposes
• price promo:ons and other point of sale
• availability of brands
• household include many buyers …and a million other reasons

Question 2

Use of mathematical models in regards to stationary markets?

Answer 2

Sta:onary markets are predictable, either from past pa)erns (empirical) or by using
mathema:cal models that mimic the market (theore,cal)
If markets are sta:onary, measures of brand performance will be more or less the same
for each period

Question 3

What are the assumptions of the NBD Dirichlet model?

Answer 3

• Stable market conditions where the number of buyers in each period is approximately equal (stationary)
• Individual consumers have steady long-run purchase propensities
• The purchases happen irregularly over time
• No feedback from past purchases (zero-order)
• Compounded by a set of statistical distribution that capture some key aspects of how people buy

Question 4

What does the dirichlekt model assume about brand choice?

Answer 4

Consumers do not devote their category purchases solely to a brand (mul:-brand buying)

• Consumers have steady propensity to buy particular brands, but a different propensity for each brand (heterogeneity)
• Brand purchases are zero order events (Successive brand purchases are independent of the preceding purchases)
• As if at random

E.g. 40% propensity to buy Special K, 20% to buy Weetbix, 10% propensity to buy Rice Bubbles etc.

Question 5

Loyalty and Brand Size: Double Jeopardy

Answer 5

Bigger brands (higher market share) have more buyers (higher penetra:on) and are bought slightly more oVen (higher purchase frequency)
Smaller brands (lower market share) have fewer buyers (lower penetra:on) and are bought slightly less oVen (lower purchase frequency)

Question 6

What rate do customers of small brands buy at?

Answer 6

These customers buy the brand at much the same rate as the customers of bigger brands
And they say much the same things (same altudes) as customers of other brands say about their brand

Question 7

Heavy and Light Buyers (quality)

Answer 7

Smaller brands have a slightly “be)er quality” customer base, in that more of their sales come from their heavier customers

Question 8

The multinomial Distribution

Answer 8

It captures the zero-order effect in relation to brands bought by consumers ( one brand purchase does not make the consumer more or less likely to buy that brand in the future)

Question 9

Share of category requirements

Answer 9

Proportion of total spending in the category of the customers of a brand that is allocated to that brand

Question 10

Repeat Buying Rate

Answer 10

Proportion of customers from one period, who buy the brand again in a subsequent equal length period

Question 11

Sole Loyalty Rate

Answer 11

Proportion of the customer base of a brand who only bought that single brand in a period

Question 12

Defection Rate

Answer 12

Proportion of first brand loyal customer who changed the brand they were first brand loyal to in a subsequent period

Question 13

First Brand Loyalty

Answer 13

Proportion of customers of the brand who use that as their main (and most purchased brand) in a given period

Question 14

Proportion of attitudinal loyalty

Answer 14

Proportion of market expressing a positive attitude towards the brand

Question 15

What are partitions?

Answer 15

here brands share more or less with other brands than normal/expected
But these are very much exceptions

A cluster of brands/ skus compete more closely – they are more likely to sell to the same people (poten:ally complimentary)
OVen associated with func:onal differences Or seen with some segmenta:on

Question 16

Difference between partitioning and segmentation

Answer 16

Par::oning is about offerings (func:onality)
Segmenta:on is about people (types of people)
They can coincide but they do not have to (first class vs bu)er)