Kristiaan Helsen

Consumer Learning in a Turbulent Market Environment: Modeling Consumer Choice Dynamics After a Product-Harm Crisis

The authors empirically study consumer choice behavior in the wake of a product-harm crisis, which creates consumer uncertainty about product quality. They develop a model that explicitly incorporates the impact of such uncertainty on consumer behavior, assuming that consumers are uncertain about the mean product quality level and learn about product quality through the signals contained in use experience and the product-harm crisis and also that consumers are uncertain about the precision of the signals in conveying product quality and update their perception of this precision over time. They estimate this model using a scanner panel data set that includes consumer purchase history before, during, and after a product-harm crisis that affected Kraft Foods australias peanut butter division in June 1996. The proposed model fits the data better than the standard consumer learning model, which assumes consumers are uncertain about product quality level but the precision of information in conveying product quality is known. This study also provides insights into consumers’ behavioral choice responses to a product-harm crisis. Finally, the authors conduct counterfactual experiments based on the estimation results and provide insights to managers on crisis management.

Toward an understanding of price wars: Their nature and how they erupt

Abstract This paper aims to improve our understanding of the unique phenomenon of market competition, called price wars, as little is known about their nature and how they erupt. More precisely, we offer selected illustrations of the reality of price wars, identify key attributes of price wars, propose a definition of price wars, and offer a conceptual framework in which early warning signals (EWSs) of price wars are distilled and linked to the likelihood and the intensity of such wars. Also, initial empirical findings on some of the effects of price wars are offered, showing that price wars inflict substantial damage on the companies involved. Implications for researchers entail that numerous research opportunities exist to better understand price wars and to eventually develop a theory of price wars that may become a vital part of a firms portfolio of competitive pricing strategies.

Some Characterizations of Stockpiling Behavior Under Uncertainty

The objective of this note is to gain new theoretical insights into stockpiling phenomena. The model used to derive our results envisions consumers as responding optimally to uncertainties in the promotion environment. We show that, all else being equal, consumers will stockpile a promoted product more intensely: (i) the lower the availability of deal opportunities, (ii) the smaller the expected deal discount, and (iii) the lower the uncertainty about the deal/regular price, provided that dealing occurs with high/low frequency.

Understanding price effects for new nondurables: How price responsiveness varies across depth-of-repeat classes and types of consumers

Abstract The objective of this study is to gain insights into the effectiveness of consumer price promotions on trial/repeat processes of newly introduced brands of consumer packaged goods. Using a consumer risk perception perspective, we develop a theoretical framework that relates the effectiveness of consumer price promotions to the depth-of-repeat cycle, the level of a consumers brand loyalty, and usage intensity. To evaluate the theory, we calibrate a multiple spell hazard rate model for several new product introductions in different product categories. The results show that promotional price sensitivities are generally higher for repeat purchases than for trial. In addition, the results indicate that loyals are less price sensitive than nonloyals. Finally, heavy users in the product class are found to be more price sensitive than light users at the trial stage.