JSM 2004 - Toronto

Abstract #300797

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Activity Number: 325
Type: Topic Contributed
Date/Time: Wednesday, August 11, 2004 : 10:30 AM to 12:20 PM
Sponsor: Section on Statistics and Marketing
Abstract - #300797
Title: Investigating the Dynamic Impact of Price Promotions on the Strength of Product Associations
Author(s): Bernd Vindevogel*+ and Dirk Van den Poel and Geert Wets
Companies: Ghent University and Ghent University and Limburg University Centre
Address: Dept. of Marketing, Gent, B-9000, Belgium
Keywords: multivariate time-series analysis ; product associations ; price promotions
Abstract:

We apply the framework of market basket analysis to measure the strength of 324 product associations. Multivariate time series analysis (VARX) is used to assess the over-time impact of price promotions on the strength of the associations. The resulting 324 VARX models consist of lift, measuring the strength of the association, and the price of the two products as endogenous variables and a feature dummy as exogenous variable. This approach allows us to model both the short run and long run effects of price on lift. In phase two, we measure the dynamic impact of price on lift with impulse response models. In phase three, the results of the dynamic impact are used as a dependent variable in a regression model. In this way, we are able to identify the influence of covariates as promotional intensity, both frequency and depth, the nature of the products, like perishability, and the nature of the association (complementarity, independence or substitution) on the evolution of the strength of the association.

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