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Experimental Methods of Analyzing Demand for Branded Consumer Goods with Applications to Problems in Marketing Strategy

Econometrica 1964 32(3), 467 open access
Prediction of consumer response to a proposed brand strategy is a major problem in marketing. An increasingly used and highly promising approach to this problem, and one pursued in this book, is to test proposed strategies in a controlled or simulated environment. This is done by placing representative consumers in an experimental environment which is sufficiently realistic to evoke responses similar to those in the marketplace. By manipulating aspects of this environment to reflect different strategies, one can predict with some confidence what will occur if those strategies are used in the market. The author presents an excellent case study in which a simulated market environment provides useful data concerning demand schedules for branded consumer goods and changes in the market share that might result from different brand policies. The book reports on a series of simulated shopping trips for toilet soap and toothpaste. Subjects were shown colored photographs indicating the brands available for each of the two products and asked to indicate the one brand for each they preferred. Prices of the preferred brand and competing brands were varied, with the price of the preferred brand always highest. The number of individuals switching and remaining loyal at different prices and the brands to which they switched were noted. The design of experiments (described in a technical appendix), the data generated and their analysis are more complex and interesting than this brief description might suggest. Chapter 5, "Experimental Results Relating to Brand Loyalty and Brand-Switching Behavior," and Chapter 6, "Models Using Experimental Data to Appraise Marketing Strategy," are the best and most important chap209