Wednesday, January 29, 2014

Predicting Purchasing Behavior Patterns in Stationary Markets

Predicting patterns of consumer behavior can be difficult. To date no one has developed a perfect model as each has its own particular short-comings. The Dirichlet model is well-established that both describes and predicts purchasing behavior patterns in stationary markets. The researchers McCabe, et. al. (2012) focuses on the success of the model for companies trying to gain market share. 

It should be first understood that all purchasing is based in habits of purchase. Customers follow certain patterns based upon how they associate the information among competing brands. Marketing nudges individuals to make one choice over another to expand their repertoire of purchasing behaviors. Strong marketing creates memories that become associated with products and services. 

Structural changes in behavior can occur when changes force choices beyond day-to-day decisions. Even though industrial marketing and purchasing is long-term and stable it can change. These changes usually are a result of introduction and reminding of products during purchasing cycles. For consumers, original patterns of purchasing can return right after promotion and therefore be short-lived changes. 

The authors used a collaborative procurement to understand the purchasing power of an organization that spends 20 billion pounds on third-party products. They observed purchasing behavior over a 12 week period to determine penetration, frequency and share of category by particular suppliers.  They found some switching patterns among suppliers in term of amount and quantity of purchases. 

Supplier B increased market share at the company over Supplier A. Even though there were no new products or services offered that would attract purchasers it was found that Supplier B invested in its regional sales force prior to the change. The Dirichlet model did well with predicting market changes before, during, and after marketing campaigns. Even when it was not accurate it worked as a benchmarking tool. 

Comment: Marketing is a process of raising a company’s voice within a particular market. The more different the culture of the target market to that of the parent the more difficult it is to find the right voice. When done properly consumers will have more memories of the product/service which raises their chances of making a purchase. Some advertisements can create motivation based upon the individual needs of the consumer. Purchasing managers are not immune to the same needs, motivations, and memory processes as general consumers. They only become more sophisticated in how they process the information and make decisions. 

McCabe, J. (2012). The power of before and after-How the Dirichlet can analyze the sales impact of promotional activity. Journal of Advertising Research, 10.

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