For automobile manufacturers, given the large profit margins associated with their automobile brands, even small improvements in customer loyalty can have a significant positive impact on profits. For this reason, automakers are generally interested in tracking customers’ loyalties for their vehicle brands.
Automakers have traditionally relied on data from survey firms, such as J.D. Power and Associates, to estimate customer loyalty to their vehicle brands. However, the substantive picture that emerges from estimating econometric models on such survey data is incomplete because these models do not consider how quickly consumers replace their cars.
In this study, Che and Seetharaman propose a new econometric approach to assessing brand loyalty that takes into account both the extent and the replacement rates of customers’ repeat-purchasing behavior across brands.
The authors obtain several notable substantive findings using their proposed empirical methodology. A few key findings are the following: (1) Chrysler is significantly “weaker” than General Motors and Ford, insofar as Chrysler had the lowest brand loyalty during the study period; (2) male, single, older, higher-income, and less educated consumers are more brand loyal than female, married, younger, lower-income, and more educated consumers; and (3) the proposed nonstationary model, with its parsimonious brand loyalty structure, fits even better than a fully unrestricted (and, therefore, highly parameterized) transition structure, under the traditional stationarity assumption, for brand choice outcomes.
The authors’ approach can be used to assist automobile manufacturers in predicting their monthly market shares over, for example, the next 12 months, which in turn can let them base their production schedules around such time-varying sales projections.
Biography
Hai Che is Assistant Professor of Marketing in Department of Marketing, Marshall School of Business, at the University of Southern California. His research focus is on the empirical analysis of consumer choices and firm pricing and the role of advertising in political campaigns. Since earning his PhD from Washington University in St. Louis in 2003, Hai has four articles published or forthcoming in top marketing journals, including Journal of Marketing Research and Marketing Science. Hai teaches an elective course on marketing research at the MBA and undergraduate levels and also a doctoral seminar on empirical models and methods in marketing.
P.B. (Seethu) Seetharaman is Professor of Marketing in the Jesse H. Jones Graduate School of Management at Rice University. His research, which deals mostly with modeling consumer choice behavior using statistical or econometric models, spans a wide range of industries, including retail gasoline, automotive, packaged goods, pharmaceuticals, and catalog retailing, among others. Seethu has published his previous research in the following journals: Journal of Marketing Research, Marketing Science, Quantitative Marketing and Economics, International Journal of Research in Marketing, Marketing Letters, Review of Marketing Science, Journal of Business & Economic Statistics, and Advances in Econometrics. Seethu also serves as an associate editor at Quantitative Marketing and Economics and is on the editorial review boards of Journal of Marketing Research, Marketing Science, and Review of Marketing Science. Seethu is currently involved in setting up a marketing doctoral program at Rice University and welcomes the opportunity to attract high-quality doctoral-level aspirants to the lush campus near downtown Houston.
Journal Marketing Research, Volume 46, Number 4, August 2009 View Table of Contents.