Theoretical Modeling in Marketing

Over the last 10 years or so, theoretical modeling has rapidly become an important style of research in marketing. To many people, however, this style is still a mystery. This article is an attempt at explaining theoretical modeling. The author argues that even though theoretical modeling is quantitative, it is closer to behavioral marketing in purpose and methodology than to quantitative decision support modeling. Whereas behavioral marketing involves empirical experiments, theoretical modeling involves logical experiments. Using this framework, the author addresses such issues as the internal and external validity of theoretical models, the purpose of theoretical modeling, and the testing of model-based theories. The agency theory explanation of salesforce compensation is used as a case study.