Purchase Loyalty is Polarised into either Repertoire or Subscription Patterns

Abstract

We have observed that competitive repeat purchase markets are polarised into two radically different structures. The first and best known we call repertoire markets; these have few solely loyal buyers as most buyers allocate their category requirements across several brands in a steady fashion. The other we call subscription markets; these have many solely loyal buyers as most buyers allocate category requirements entirely to one brand. This is an empirical difference rather than a theoretical distinction, and surprisingly there appear to be no markets which occupy the middle ground between these two extremes. The repertoire-subscription distinction turns out to be an important boundary condition for some well-established generalisations about repeat purchase behavior. Despite this, the NBD-Dirichlet model of purchase incidence and brand choice fits both types of markets, and the differences in loyalty are adequately captured by the Dirichlet's switching parameter, S. This represents an important extension of the generalisability of the Dirichlet, allowing the insights gained from repertoire market analysis to be applied to customer churn analysis in subscription markets.