Purchase Volume Research Articles

A two-supplier inventory model

In this paper, we consider an inventory system with two suppliers. A supply agreement is made with one of the suppliers, to deliver a fixed quantity Q every review period. The replenishment decisions for the other supplier are governed by a (R, S) replenishment policy; that is, when the inventory position at a review period is below the order-up-to level S, an order is placed at the second supplier such that the inventory position is raised up to S. In this paper, an algorithm is developed for the determination of the decision parameters S and Q such that the long-run expected average costs per time unit are minimized subject to a service level constraint. The costs are defined as the sum of the holding, purchasing, and ordering costs. Based on the numerical results, conclusions follow about the division of the purchase volume among the two suppliers.

The Brand Awareness-to-Preference Link in Business Markets:

One of the key issues in business-to-business communication-the relationship between brand awareness and brand preference-is investigated by estimating both an S-shaped and a linear model with a database of information on the semiconductor manufacturing industry. Research results confirm the existence of threshold and saturation effects in the brand awareness-preference association. The average threshold level is approximately 10%-implying that a brand must surpass this awareness level before beginning to generate meaningful additions to its share of brand preference. In the semiconductor manufacturing industry the sensitivity of brand preference share to increases in brand awareness level displays increasing returns to scale for most brands across various product categories. This sensitivity tends to be higher when purchasing process is short, price is an important buying-decision criterion, annual purchase volume is large, product technology is stable, and number of competing brands is small.

Isolating the Determinants of Innovativeness: A Split-Population Tobit (SPOT) Duration Model of Timing and Volume of First and Repeat Purchase

The authors present the Split-Population Tobit (SPOT) duration model to incorporate two conceptually distinct dimensions of innovativeness in a single framework, namely, the timing and volume of adoption. Rather than utilizing a diffusion model specification based on word-of-mouth and social contagion effects, the present approach uses a growth model specification and delineates a general function of time to describe the distribution of adoption timing. Estimation and several validation exercises performed on a data set describing the diffusion of personal computers across a sample of over 3000 U.S. firms provide strong support for the superiority of the SPOT model over models derived from restricted conceptualizations of innovativeness. The empirical work, albeit modest, tests the impact of covariates, such as firm-size and decision-centralization, on the dimensions of innovativeness and sheds light on some inconsistent findings in the innovation adoption literature. The authors subsequently derive the extended SPOT model (EXT-SPOT) to incorporate repeat purchase volume and timing in the SPOT framework. Finally, they discuss limitations, further research directions, and implications for the practitioner.

Market structure and incomplete information: Price formation in a real-world repeated English auction

This paper examines the effect of buyer size on price formation in an English auction of used state police cars. While open auctions generally favor competitive pricing, Bikhchandani (1988) develops a model of a second-price, common value auction in which bidders can use strategic behavior based on repeated sales to develop an aggressive reputation and, as a result, pay lower prices in equilibrium. The paper tests this hypothesis by examining sales of 340 used automobiles sold at 13 public auctions conditional on the volume of purchases made by the three largest buyers at the auctions. The empirical results show that the number of buyers plays a stronger role in price formation than does buyer size.

Customer Base Analysis: An Industrial Purchase Process Application

Customer base analysis is concerned with using the observed past purchase behavior of customers to understand their current and likely future purchase patterns. More specifically, as developed in Schmittlein et al. (1987), customer base analysis uses data on the frequency, timing, and dollar value of each customer's past purchases to infer • the number of customers currently active, • how that number has changed over time, • which individual customers are most likely still active, • how much longer each is likely to remain an active customer, and • how many purchases can be expected from each during any future time period of interest. In this paper we empirically validate the model proposed by Schmittlein et al. In doing so, we provide one of the few applications of stochastic models to industrial purchase processes and industrial marketing decisions. Besides showing that the model does capture key aspects of the purchase process, we also present a more effective parameter estimation method and some results regarding sampling properties of the parameter estimates. Finally, we extend the model to explicitly incorporate dollar volume of past purchases. Our results indicate that this kind of customer base analysis can be both effective in predicting purchase patterns and in generating insights into how key customer groups differ. The link of both these benefits to industrial marketing decision making is also discussed.

Purchase frequency, sample selection, and price sensitivity: The heavy-user bias

We study the relationship between purchase frequency and volume and choice behavior as summarized by brand preferences and price sensitivity. Our most striking finding is that consumers with high purchase frequency or high purchase volume are much more price sensitive and have more sharply defined preferences for national brands than consumers with low frequency or low volume of purchase. In much of the choice literature, analysis is confined to households that have on average a larger number of purchases than is representative of the ERIM panel. Our findings suggest that some caution should be exercised in interpreting studies that employ purchase-frequency or purchase-number sample inclusion rules. Our findings also support an information theoretic point of view in which households become more price sensitive via costly acquisition of information about the distribution of prices.

Cognitive styles and personal involvement of market initiators for ‘healthy’ food brands: Implications for adoption theory

The paper reports a test of hypotheses relating to consumers' innovative food purchasing and considers the implications of adaptive-innovative cognitive style, measured by the Kirton Adaption-Innovation Inventory (KAI), for adoption theory and consumer research. An empirical investigation of female consumers' ( N = 151) self-reported purchasing of ‘healthy’ food innovations examines the relationship between KAI and purchase volume. Although KAI was, as hypothesized, weakly related to consumer innovativeness, a majority of respondents had personality profiles distinctly different from those normally associated with innovativeness. A subset of these ‘adaptors’ who were highly involved in the product field accounted for the highest level of brand purchase. Implications for adoption theory of both innovative and adaptive cognitive styles coexisting among market initiators are discussed.

Cognitive Style and Personal Involvement as Explicators of Innovative Purchasing of ″Healthy″ Food Brands

In an earlier study, concerned with the innovative purchasing of “healthy” food products, the largest volume of innovations were purchased unexpectedly by adaptors. It was subsequently argued that adaptors who were highly involved personally with the product field would exhibit such behaviour. The empirical investigation of female consumers′ (n = 151) self‐reported innovative purchasing described here tests that hypothesis, examining the interactive relationship between two independent variables, scores on the Kirton Adaption Innovation Inventory and on Zaichkowsky′s Personal Involvement Inventory, and the volume of purchases of innovative brands of “healthy” food brands. Results indicate that the market for new food brands comprises three psychographically‐defined segments, and have far‐reaching implications for adoption decision models and for marketing strategies for innovations.

Usage rate segmentation of the electronic shopper: heavy versus non-heavy dollar volume purchasers

The purpose of this exploratory study was to classify current electronic shoppers into heavy and non-heavy dollar volume purchasers of merchandise or services through electronic shopping and to examine differences between the two groups in terms of shopping orientations, videotex usage, purchases made through an electronic mall, satisfaction with the electronic shopping attributes and lifestyle characteristics. The questionnaire was mailed to a random sample of 1,000 users of a nation-wide videotex company in the United States. One hundred and thirty-eight respondents out of the 600 who returned the questionnaire were electronic shoppers. Based on dollar volume of purchases made through the electronic mall, electronic shoppers were classified as heavy purchasers (n = 38) and non-heavy purchasers (n = 100). Mann-Whitney Test revealed significant differences between the two groups regarding shopping orientations, videotex usage, types of purchases made through and satisfaction with electronic shopping. Impl...

Market Segmentation of Pennslyvania Floral Consumers by Purchase Volume and Primary Retail Outlet

Market segmentation is an, efficient method of defining consumer groups to develop new markets. The purpose of this research was to determine the viability of market segmentation strategies based on volume and location of purchase. A sample of 401 Pennsylvania floral consumers was divided into groups based on the number and the primary location of floral purchases. Two discriminant analyses were conducted to determine differences between market segments. Heavy floral consumers exhibited a higher level of floral knowledge, purchased more floral products for themselves and from nonflorist retailers, and had higher incomes than light or medium floral users. Florist customers purchased fresh flowers more frequently, bought more floral gifts, and spent a higher amount per purchase than supermarket customers. Segmentation based on volume of purchase and primary retail location are both viable alternatives for market development strategies for floral consumers.

The Effects of Situational Factors on In-Store Grocery Shopping Behavior: The Role of Store Environment and Time Available for Shopping

We conducted a field experiment to explore the effects of two situational factors, store knowledge and time available for shopping, on consumers' grocery shopping behavior. The results indicate that these two factors have an impact on such shopping behaviors as failure to make the intended purchases, unplanned buying, brand and product class switching, and purchase volume deliberation. The findings also suggest that the information processing activities that mediate these relationships differ across shopping conditions. Implications for managing the grocery store environment that may advance current practice are offered.

Multimarket Oligopoly: Strategic Substitutes and Complements

A firm's actions in one market can change competitors' strategies in a second market by affecting its own marginal costs in that other market. Whether the action provides costs or benefits in the second market depends on (a) whether it increases or decreases marginal costs in the second market and (b) whether competitors' products are strategic substitutes or strategic complements. The latter distinction is determined by whether more "aggressive" play (e.g., lower price or higher quantity) by one firm in a market lowers or raises competing firms' marginal profitabilities in that market. Many recent results in oligopoly theory can be most easily understood in terms of strategic substitutes and complements.

Alternative to the traditional discount method of wholesaler purchasing

A program of purchasing drugs from wholesalers at the wholesaler's exact invoice cost plus a percentage is described and compared with the traditional method of average wholesale price (AWP) less a discount. The comparison was conducted by the pharmacy department of a 310-bed, teaching hospital that awarded a one-year contract to a wholesaler offering its items at the exact cost plus a pre-established percentage. Data collected from monthly wholesaler computer printouts gave the following information on each product: (1) list price per item, (2) actual cost to pharmacy per item, (3) percentage discount from AWP, and (4) quantity ordered. The net percentage discount from AWP for 12 months was calculated and compared to the former (traditional) discount rate. The net discount from AWP was 15.6% for purchases made by the hospital during the first 12 months of the program. When compared with the smaller discount the hospital traditionally received, the new program saved the hospital $5758 on annual purchases of $136,419. The actual dollar savings to an institution that changes from a traditional discount program to a cost-plus-percentage program depends on: (1) the negotiated percentage added to wholesaler cost, (2) the discount from AWP that the institution was previously receiving, and (3) the volume of wholesale purchases.

The association between record purchase volume and other music‐related characteristics

The association between record purchase volume and other music‐related characteristics

National survey of selected hospital pharmacy practices

The incidence of 10 selected hospital pharmacy programs in short-term hospitals which contained a pharmacy was surveyed. A short questionnaire was mailed to a national sample of 738 hospitals. The 10 programs surveyed were: unit dose drug distribution; pharmacy-prepared i.v. admixtures; pharmacy-controlled drug administration; radiopharmaceutical dispensing; drug usage review; use of computers in the dispensing process; 24-hour pharmacy service; participation in group purchasing; pharmacy operation of central supply; and pharmacists' authority to select the brand or supplier of drugs. In addition, the volume of drug and supply purchases was determined. A large number of pharmacies (41%) belonged to a group purchasing plan, and a high percentage (67%) reported that pharmacists had authority to select the source of supply for all drug orders unless noted otherwise by the prescriber. Less than 10% of the hospitals had both complete unit dose drug distribution and intravenous admixture programs; an additional 10% had implemented such programs partially. Only 17% of the pharmacies in large hospitals were open 24 hours a day. Computer-assisted medication dispensing was used by 13% of the large hospitals and 5% of the small hospitals. Total pharmacy purchases for all short-term hospitals in 1974 was estimated to be 1.5 billion dollars.

OUTLOOK FOR STATE AND LOCAL GOVERNMENT SECURITIES

THE YEAR 1961 was unusual in being a record year in volume of new long-term capital borrowed by state and local governmental units, the high volume of bank purchases of tax-exempts, while, at the same time, yields changed only moderately. Gross new long-term capital borrowed by state and local governmental units during 1961 apparently amounted to $8.2 billion-a record level. Through November, it appeared that 1961 purchases of tax-exempts by commercial banks would be second to the record year of 1958. However, changes in Regulation Q apparently spurred very large December purchases of state and local securities, so that it is very likely that the 1958 record was equaled. While the high volume of new issues and the substantial purchases by commercial banks in the year as a whole probably canceled each other oult as factors affecting yields, perhaps most important in explaining yield stability in this market was the substantially unchanged monetary policy, unchanged trend in bank loans, and fairly constant quarter-to-quarter flow of new issues. For 1962 the outlook for volume of tax-exempt borrowing can be discussed in terms of certain general indicators and by adding up specific needs that can be foreseen. General indicators of volume include (1) inventories of projects; (2) voter approvals; (3) fiscal positions of governmental units; and (4) the broad interest-rate outlook. These general indicators of volume are difficult to rely on but are perhaps worthwhile to note.

Quantity Discounts and Competition: Economic Rationality or Robinson-Patman

THIS paper is a discussion of quantity discounts, not because they are legally unique, but because they typify the mounting confusion of courts and the Federal Trade Commission as to the impact of section 2(a) of the Robinson-Patman Act on its avowed purpose of fostering competition.1 The precise questions on which the paper focuses are: Does Robinson-Patman require (or even authorize) condemnation by the courts and FTC of virtually all discounting systems based either on quantity of individual purchases, or volume of total purchases during the preceding year? Secondly, if it does, is this an economically justifiable proscription? Finally, do section 2(a) quantity limit orders have the same economic impact as cease and desist orders? The paper concludes that Congress intended Robinson-Patman to protect individual competitors as well as competition. But injury to competition and injury to competitors are not the same. Since the courts have generally equated the two concepts, they often have condemned discounts without economic justification. It is suggested that the standard adopted by the courts for measuring a quantity discount's impact on competition, injury to individual competitors, is inaccurate and is the key to explaining confusion in the law of this subject which now exists. Because of this confusion, the courts and Commission have failed to see that some quantity discounts may, in fact, benefit the consuming public. Finally, it is contended that this situation is not a necessary concomitant of the Robinson-Patman Act, but rather results from the interpretation which it has been given.

Some Results of Governmental Attempts to Foster Recovery

Since early in 1930, a large part of the energy of high officials of the Federal Government has been devoted to the problem of fostering recovery. Many supposedly helpful devices have been utilized. What have been the net results ? Both the Hoover and the Roosevelt administrations have repeatedly tried to bring about recovery by assuring the public that, the worst of the depression being past, everyone should proceed at once to buy goods, hire labor, and prepare for the prosperity just around the corner. There is no evidence that all of these campaigns combined have, in any degree, furthered the recovery of business. These campaigns have failed for the simple reason that the buying power of an individual is usually tied closely to his income. It follows that, if he buys more of one article, he buys less of another; if he enlarges his purchases this week, he curtails them next week. The only way to expand materially the total volume of purchases over any considerable period of time is to induce large numbers of persons to buy more than their respective incomes. They can do this only if they buy on credit, and, in time of depression, few people both can and will take this risk.