Identifying the Deal Prone Segment

A model of consumer buying behavior is used to identify household characteristics that should affect deal proneness. The model treats household purchasing and inventory decisions like those of a firm. In other words, the household's purchasing decisions are assumed to be based on such factors as transaction costs, holding costs, and stockout costs in addition to product price. Household characteristics then are related to these cost parameters to identify households that are likely to be deal prone. The predictions are tested empirically by use of panel data for five frequently purchased products. The empirical results indicate that deal prone households can be identified and that the key variables affecting deal proneness are household resource variables such as home ownership and automobile ownership.