Investigating Household State Dependence Effects across Categories

Abstract

Brand choices over time are dictated not just by households’ intrinsic brand preferences, but also by marketing variables and state dependence effects. The authors examine brand choice behavior across five product categories as a function of these variables. Choice within a category is modeled with a multinomial probit model. A Bayesian variance components approach is used to model the covariation of household response parameters across categories. The model enables the authors to identify similarities in households’ state dependence effects across categories. On the basis of purchase data from a panel of 785 households, they also (1) estimate the correlations between household parameters for the marketing mix and state dependence, (2) study whether state dependence effects diminish over time, (3) investigate whether state dependence for a household is related to its demographic and behavioral characteristics, and (4) analyze whether category variables influence state dependence. The results indicate that households display similar state dependence effects across the five categories, with two categories exhibiting significantly lower state dependence levels than the other three. Furthermore, significant correlations exist between state dependence effects and marketing mix sensitivities. A household's level of brand choice inertia diminishes with time elapsed since the previous purchase. State dependence is influenced by shopping behavior variables but not by demographics.