The patterns of long-term repeat-buying in Dirichlet markets

PhD Thesis


Graham, C. (2012). The patterns of long-term repeat-buying in Dirichlet markets. PhD Thesis London South Bank University Ehrenberg Centre for Research in Marketing
AuthorsGraham, C.
TypePhD Thesis
Abstract

Dirichlet markets are stationary and unsegmented, and characterised by predictable patterns of split-loyal buying. This is because, across the population, individual but different household purchase propensities tend to remain stable. Although Dirichlet theory is among the most robust in marketing science, it has not yet been shown from empirical evidence how or if these purchase propensities evolve in the long run, knowledge crucial to marketers concerned with disrupting category structure. This thesis now describes the patterns of long-term repeat-buying. The research approach adopted was the differentiated replication and extension of empirical generalisations under the new condition of extended time, evaluating observations in a 26-quarter household panel of continuous reporters against steady-state Dirichlet benchmarks.
In successive and non-adjacent quarters, contrary to widely held beliefs, few cases of persistent brand share growth or decline were observed and quarterly category structures retained Dirichlet characteristics even over six years. But analysis of cumulative data aggregations revealed that underlying purchase propensities were not entirely stable, leading to a gradual deterioration in model fit to longer reference periods. The main pattern observed was an unpredicted and substantial increase in brand switching, but since this remained governed by Double Jeopardy, and category purchase incidence was largely steady, no segmentation resulted and cumulative shares remained near-stationary.
Findings contribute to knowledge of the nature of long-run behavioural loyalty. They establish that new uses of the Dirichlet in modelling management periods at wider intervals are possible since the effects of trending propensities are marginal when viewed in medium term data. They reveal the evolution of the DJ relationship over the long-run, and they confirm the behavioural drivers of exceptional brand dynamics.
Findings also account for several well-reported systematic deviations in short term Dirichlet fit, but perhaps most importantly, the discovery of long-run equilibrium coupled with the unpredicted but systematic underlying churn of buyers between brands offers no support for loyalty strategies. Rather, it emphasises the importance for practitioners of maintaining market share transaction by transaction.

KeywordsNBD-Dirichlet, Double Jeopardy, Empirical Generalisations, Brand Growth, Long-Term Behavioural Loyalty
Year2012
PublisherLondon South Bank University
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Print2012
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Deposited13 Aug 2020
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