ESSAYS ON THE IMPACT OF CONSUMER HETEROGENEITY ON MARKETING MIX MANAGEMENT

Date of Award

8-23-2024

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Marketing

Advisor(s)

Scott Fay

Abstract

A growing body of literature investigates the role of consumer heterogeneity in various aspects of marketing mix management, including pricing, distribution channels, product delivery, and promotion. Numerous studies document and emphasize the importance of considering different consumer types when adjusting prices, targeting market segments, deciding on channel structure, or optimizing promotion campaigns. In this dissertation, I further explore the impact of consumer heterogeneity on two distinct areas in marketing literature - shipping strategy and advertising response. The first essay is motivated by the observation that retailers have been universally attempting to improve their shipping performance and shorten the shipping time for consumers shopping online. I question the prevalent wisdom behind this phenomenon that it is always beneficial to shorten delivery absent of any cost saving or logistical impediments. Using a stylized analytical model, I model a multi-channel retailer operating in a market consisting of consumers with heterogeneous valuations and channel preferences. I find that multichannel retailers can benefit from delaying delivery when the online channel is not attractive for all consumers and the physical stores are available and robust. This consideration can benefit the retailers by incentivizing them to target more market segments or operate more channels. Surprisingly, I find that consumers can also benefit from this multichannel arrangement by shopping from the channel with the highest level of convenience given their preferences. The second essay investigates advertising response by exploring a new method for measuring ad effectiveness for TV advertising. Borrowing from Models of Stochastic Buyer Behavior, I explore how advertisements impact consumers across three purchase metrics- conversion rate, retention likelihood, and average spending. Furthermore, I explore if and how population heterogeneity is affected by ads and whether the effect is symmetric across different quantiles. I document heterogeneity in response in both dimensions and show that while sales may increase by ads, it is primarily due to an increase in opportunistic demand and infrequent buying behavior. In addition, I show that while ads may increase opportunistic behavior, they simultaneously increase the retention likelihood of loyal customers.

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