Effects of Price Promotions on Variety-Seeking and Reinforcement Behavior
Barbara E. Kahn, Jagmohan S. Raju
Marketing Science · 1991 · Volume 10 · Issue 4
Abstract
A stochastic model is proposed to examine how changes in frequency of price discounts affect brand choice decisions of consumers who exhibit variety-seeking and reinforcement behavior. It is shown that the effect on choice depends on whether the brand offering discounts is a major or minor brand in the product category. This model extends the existing literature on stochastic models of variety-seeking behavior by explicitly incorporating switching due to promotions along with intrinsic switching due to variety-seeking. The model yields testable hypotheses which are supported in a laboratory experiment and on analyses of the IRI cracker data.
Keywords
choice models, promotions, buyer behavior, segmentation
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