A Composite Heterogeneous Model of Brand Choice and Purchase Timing Behavior

A stochastic model of purchase behavior is developed to aid marketing managers analyze and predict consumer purchase behavior. The model is based upon a composite structure, that is, it integrates several submodel components (e.g., brand choice and purchase incidence behavior) within its structure. Although the overall model is founded upon individual consumer behavior assumptions, it provides measures of market behavior by aggregating individual behavior parameters over a heterogeneous population of consumers. Thus, the model is developed from assumptions of relevant probability laws that relate to individual consumer's probability of brand choice and the time between product class purchases; as well as the distributions of brand choice probability and the average product class purchase rate of individuals over the population of consumers. The model provides aggregate market behavior measures including brand market share, expected brand sales and the distribution of brand purchase probability over the consumer population through time. Other measures of market behavior of potential use to marketing managers, such as the cumulative penetration, trial and repeat purchase ratio for a given brand, are also derived from the brand's aggregate theoretical purchase distribution.