Understanding price effects for new nondurables: How price responsiveness varies across depth-of-repeat classes and types of consumers

Abstract

The objective of this study is to gain insights into the effectiveness of consumer price promotions on trial/repeat processes of newly introduced brands of consumer packaged goods. Using a consumer risk perception perspective, we develop a theoretical framework that relates the effectiveness of consumer price promotions to the depth-of-repeat cycle, the level of a consumer's brand loyalty, and usage intensity. To evaluate the theory, we calibrate a multiple spell hazard rate model for several new product introductions in different product categories. The results show that promotional price sensitivities are generally higher for repeat purchases than for trial. In addition, the results indicate that loyals are less price sensitive than nonloyals. Finally, heavy users in the product class are found to be more price sensitive than light users at the trial stage. © 1994.