Abstract
The authors develop an approach to decompose a market-level matrix of own- and cross-price elasticities to reveal potentially overlapping preference segments. The approach is grounded on the premise that markets may be represented by a parsimonious number of relatively homogeneous segments. Market-level elasticities are expressed as functions of segment weights and within-segment market shares. These relationships permit segment weights and within-segment market shares to be estimated from the market-level elasticity matrix and patterns of brand substitutability to be analyzed. The approach is illustrated with data on the grocery coffee category.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Allenby, Greg M. (1989). “A Unified Approach to Identifying, Estimating and Testing Demand Structures with Aggregate Scanner Data,”Marketing Science 8 (Summer), 265–280.
Bass, Frank M., Abel P. Jeuland, and Gordon P. Wright. (1976). “Equilibrium Stochastic Choice and Market Penetration Theories: Derivations and Comparisons,”Management Science 22 (June), 1051–1063.
Ben-Akiva, Moshe, and Steven R. Lerman. (1985).Discrete Choice Analysis. Cambridge, MA: MIT Press.
Bucklin, Randolph E., and V. Srinivasan. (1991). “Determining Inter-Brand Substitutability Through Survey Measurement of Consumer Preference Structures,”Journal of Marketing Research 28 (February), 58–71.
Cooper, Lee G. (1988). “Competitive Maps: The Structure Underlying Asymmetric Cross Elasticities,”Management Science 34 (June), 707–723.
Day, George S., Allan D. Shocker, and Rajendra K. Srivastava. (1979). “Customer-Oriented Approaches to Identifying Product Markets,”Journal of Marketing 43 (Fall), 8–19.
Grover, Rajiv, and V. Srinivasan. (1987). “A Simultaneous Approach to Market Segmentation and Market Structuring,”Journal of Marketing Research 24 (May), 139–153.
Guadagni, Peter, and John D. C. Little. (1983). “A Logit Model of Brand Choice Calibrated on Scanner Data,”Marketing Science 2 (Summer), 203–238.
Jain, Dipak, Frank M. Bass, and Yu-Min Chen. (1990). “Estimation of Latent Class Models with Heterogeneous Choice Probabilities: An Application to Market Structuring,”Journal of Marketing Research 27 (February), 94–101.
Kamakura, Wagner A., and Gary J. Russell. (1989). “A Probabilistic Choice Model for Market Segmentation and Elasticity Structure,”Journal of Marketing Research 26 (November), 379–391.
Kamakura, Wagner A., and Rajendra K. Srivastava. (1984). “Predicting Choice Shares Under Conditions of Brand Interdependence,”Journal of Marketing Research 21 (November), 420–434.
Nakanishi, Masao, and Lee G. Cooper. (1974). “Parameter Estimation for a Multiplicative Competitive Interaction Model: Least Squares Approach,”Journal of Marketing Research 11 (August), 303–311.
Rao, Vithala R., and Darius J. Sabavala. (1981). “Inference of Hierarchical Choice Processes from Panel Data,”Journal of Consumer Research 8 (June), 85–96.
Russell, Gary J., and Ruth N. Bolton. (1988). “Implications of Market Structure for Elasticity Structure,”Journal of Marketing Research 25 (August), 229–241.
Urban, Glen L., Philip L. Johnson, and John R. Hauser. (1984). “Testing Competitive Market Structures,”Marketing Science 3 (Spring), 83–112.
Author information
Authors and Affiliations
Additional information
The authors wish to thank M/A/R/C Inc., Las Colinas, Texas and Information Resources, Inc., Chicago, Illinois for their assistance in collecting the data used in this study. This research was supported in part by the Dean's Fund for Faculty Research of the Owen School.
Rights and permissions
About this article
Cite this article
Russell, G.J., Bucklin, R.E. & Srinivasan, V. Identifying multiple preference segments from own- and cross-price elasticities. Marketing Letters 4, 5–18 (1993). https://doi.org/10.1007/BF00994183
Received:
Revised:
Issue Date:
DOI: https://doi.org/10.1007/BF00994183