An Integrated Choice Model Incorporating Alternative Mechanisms for Consumers’ Reactions to In-Store Display and Feature Advertising

The marketing literature has suggested two prominent decision mechanisms through which in-store display and feature advertising can affect brand choice, which I call the price-cut proxy effect and the consideration set formation effect. The primary objective of this study is to propose an integrated brand choice model that incorporates these two possible behavioral mechanisms, which have been shown to work by previous research. The model allows consumers to use various combinations of the decision mechanisms with different probabilities and thus enables one to jointly assess the extent to which each effect might occur in actual purchase data and to investigate how consumers might differ in their tendencies to engage in these decision processes. By incorporating these likely behavioral mechanisms, the proposed model alleviates the problems caused by multicollinearity and produces sensible parameter estimates for the joint effects of promotion vehicles (in-store display, feature ad, and price discount), which contributes to better managerial decision making.