Peter T. L. Popkowski Leszczyc

Consumer store choice dynamics: an analysis of the competitive market structure for grocery stores

This study aims at formulating and testing a model of store choice dynamics to measure the effects of consumer characteristics on consumer grocery store choice and switching behavior. A dynamic hazard model is estimated to obtain an understanding of the components influencing consumer purchase timing, store choice, and the competitive dynamics of retail competition. The hazard model is combined with an internal market structure analysis using a generalized factor analytic structure. We estimate a latent structure that is both store and store chain specific. This allows us to study store competition at the store chain level such as competition based on price such as EDLP versus a Hi-Lo pricing strategy and competition specific to a store due to differences in location.

Market share response and competitive interaction: The impact of temporary, evolving and structural changes in prices

Managing pricing is a challenging task due to the significant impact on shares and the likelihood of strong consumer and competitor reaction. The major contributions of this paper are to assess comprehensive share response to temporary, evolving and structural changes in prices and to determine the level of market share as a function of levels of prices. For the empirical analysis, we examine two consumer product categories and find that it is valuable to distinguish among temporary, evolving and structural changes in prices, as their impact on market shares tends to differ. Further, we find that subsequent competitive reaction will influence predictions of price response. Accordingly, it is important for managers to use conjectures regarding competitive price reactions in assessing the impact of policy changes. We conclude with the strategic implications of the findings and discuss a number of opportunities for future research.

Experimental choice analysis of shopping strategies

Recent changes in retail structure have created additional ways for consumers to organize their shopping trips. This study examines the prevalence of different shopping strategies and the impact of managerial decisions related to pricing, promotions, service, and assortment on the choice of shopping strategy. A conjoint choice model is developed to address these questions. The model differs from most previous conjoint choice models in retailing in that it incorporates the similarity of competing strategies and allows one to test whether consumer choices of shopping strategy are dependent on contextual variables such as weekday vs. weekend vs. month-end shopping.

To Bundle or Not to Bundle: Determinants of the Profitability of Multi-Item Auctions

This article introduces and empirically tests a conceptual model of the key determinants of the profitability of bundling in auction markets. The model encapsulates hypotheses about how seller revenue from the combined (i.e., bundle) auction of component products relative to that from separate auctions of the components is influenced by the heterogeneity in bidders’ product valuations, the degree of complementarity between component products, the particular multi-item selling strategy, and the outside availability of the products. The results of three field experiments show that though bundle auctions tend to be less profitable for noncomplementary and substitute products, they are on average 50% more profitable than separate auctions when there is (even only moderate) complementarity between the component products. The latter effect is greater when the bundle and the separate components are offered at different times, and it is more pronounced for services than for tangible goods. The findings also identify conditions under which each of the essential multi-item selling strategies for fixed-price settings (pure components, pure bundling, and mixed bundling) tends to maximize seller revenue in auctions.

Search and Choice in Online Consumer Auctions

Price dispersion in simultaneous online auctions is a puzzle in light of the relatively low search costs required to find the lower price. Much of this price dispersion appears to be due to a lack of switching by bidders between auctions, which in turn could be due to inertia related to search costs. We identify some of the influencing factors through a controlled field experiment involving pairs of simultaneous auctions. Keeping the sellers and the goods sold identical between two auctions, we vary auction design features between and within pairs including shipping cost, open reserve, secret reserve price, and duration, and we provide bidders with incentives to search. We use a choice model that examines individual choice between pairs of simultaneous auctions. We find that within-pair price dispersion is substantial and that prices and auction choice by bidders are indeed related to search costs. We find strong inertia in auction choice and find that this effect significantly interacts with time left in the auction. Although individuals do not always choose a lower-priced auction, they are more likely to do so when search costs are low or search incentives are high.

The Impact of Online Auction Duration

One view regarding auction duration suggests that longer auctions would result in more bidders and more bids, which in turn would result in higher prices. An opposing view is that shorter auctions might appeal to impatient bidders, or alternatively, that shorter duration might lead to more competitive dynamics. To examine these competing notions, we conduct pairwise comparisons of simultaneous auctions identical in all but duration. The auctions are conducted on two different platforms---eBay and a local auction site. We find that in eBay auctions, longer duration increases the number of bidders and bids, and consequently increases final prices by about 11%. On the local auction website, with far fewer auctions and a more steady set of participants, the effect is reversed, and shorter auctions generate higher prices by about 20%. Both sets of effects are robust and significant. We look at bidding activity on both sites to try to get at the root of that reversal. We find that in eBay auctions, the higher price in the longer-duration auction is accompanied by a higher number of participating bidders and a higher number of bids placed in the auction. In the local site, we find that the auction duration does not significantly affect the number of participating bidders or the number of bids placed in an auction. However, the magnitude of jump bids is negatively and significantly correlated with duration. These jump bids are in turn shown to impact final prices.

Multiple Ways of Measuring Brand Loyalty

Recently, DuWors and Haines (1990) developed a new measure of brand loyalty based on event history analysis. They measure brand loyalty as the time until a consumer switches to another brand for the first time. This measure is an improvement since it can be applied for either static or timedependent loyalty. However, there are also problems. The measure does not consider competing-risks although their data contain multiple brands. More importantly, heterogeneity is not allowed for, which may lead to biased results and spurious state dependence (Heckman and Singer 1984). What appears as time-dependent loyalty may be an artifact due to aggregating consumers with heterogeneous purchase probabilities. In addition, they only consider the time until the first switch. This may provide a deceptive picture of loyalty if brand switching is frequent in a product category.

Joint Estimates of Purchase Timing and Brand Switch Tendency: Results from a Scanner Panel Data Set of Frequently Purchased Products

Our purpose in this paper is to measure the correlation between the purchase timing and brand switching behaviour of households. We want to study (i) whether households switch brands more often for the products they purchase more frequently, and (ii) to identify the demographic variables that influence purchase timing and the marketing variables that influence the brand switching. These research issues are important to brand managers who want to encourage purchase acceleration and loyalty to particular brands. Managers can use our model for identifying market segments that buy more often but switch less often, the heavy users of a brand, or segments with growth potential. Our data are from the scanner panel purchase data collected in two cities by the A.C. Nielsen Company over a period of approximately one year. We aggregate the purchases to weekly units and select two categories. We test our model and find that while for purchases of diapers there is no evidence of a significant correlation between purchase timing and brand switching, for ketchup purchases, there is a significant positive relationship.

Send-for-review decisions, brand equity, and pricing

Purpose – The purpose of this paper is to study firms’ decisions of voluntary disclosure of high product quality by sending their products to intermediaries for review, and how the nature of the reviews subsequently substitutes the brand names in terms of affecting the price of the product. Design/methodology/approach – Using data on camcorders and point & shoot digital cameras collected from multiple intermediary sources, this paper empirically tests the relationships among brand equity, send for review decisions, the nature of reviews and pricing, controlling for endogeneity. Findings – This paper finds that firms are likely to send their high-quality products to the intermediaries for review, but such likelihood varies across different brands. Relatively weak brands are more likely to send their products for review than relatively strong brands. By doing so, weak brands receive two benefits: first, intermediary reviews help eliminate price differentials between weak brands and strong brands. The more positive is the review, the higher is the price. When intermediary reviews are not obtained, some strong brands effectively charge a price premium over weak brands. Second, intermediary reviews subsequently attract more consumer word of mouth (WOM). The more positive is the review, the more consumer WOM is attracted. Researchlimitations/implications – One limitation is that this paper does not account for the influence of intra-brand competition. The second limitation is related to the assumption that intermediary reviews are accurate. Practicalimplications – This paper offers managerial implications to brand managers concerning send-for-review and pricing decisions. It proposes how managers leverage third-party endorsement in launching a new product. Originality/value – This paper is one of the few papers empirically studying the interaction of two communication approaches: disclosure and brand signaling. It modifies the commonly assumed relationships among brand, quality and price by demonstrating the substitute effect of intermediary reviews and brand names on price. This paper is also the first research that empirically examines the impact of firms’ “send-for-review” decisions on generating consumer WOM. Managerially, this paper substantiates Godes et al.’s (2005) framework on how firms should manage social interactions upon the release of new products.

Snipe bidding behaviour in eBay auctions

Our research investigates what factors make snipe bidding more likely, whether sniping pays, and how an auction can be designed to minimise sniping. We estimate sniping probability in eBay auctions using multivariate models to examine novel datasets compiled from auctions of the Norelco electric razor and the Sony PlayStation2. Our main results reveal that the winner of an auction is more likely to be a snipe bidder and that a lower ending price increases the likelihood that the winner of an auction is a snipe bidder; everything else held constant. We find that experienced bidders are more likely to engage in sniping behaviour. In addition, we find that an auction designer or a seller can discourage snipe bidding by setting a longer duration and/or a lower (or no) reserve price.