The Dirichlet model in marketing
Date
2022
Authors
Driesener, C.
Rungie, C.
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Journal article
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Journal of Consumer Behaviour, 2022; 21(1):7-18
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Abstract
We present a review of Gerald Goodhardt's most famous contribution to marketing science—the NBD-Dirichlet model. This provides a powerful illustration of the com- plex pathway and useful associated discoveries that over 25 years lead to the specifi- cation and application of a key marketing model. We identify the process that started with the negative binomial distribution (NBD) applied to purchase incidence, exam- ined alternatives such as the logarithmic series distribution (LSD) and the beta bino- mial distribution (BBD), and along the way developed conditional trend analysis (CTA). We then explore the development of brand choice beginning with duplication of purchase as a method for understanding the underlying patterns, before moving into various approaches to modelling choice including a multivariate NBD, and even- tually a multivariate BBD—the Dirichlet multinomial distribution (DMD). We discuss key events in modelling consumer behaviour and outline the model's implications for how marketers should think about consumers, or more specifically the Dirichlet con- sumer. Finally, we provide a survey of the model's applications uncovering a rich recent history and bright future for Goodhardt's legacy.
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Copyright 2021 John Wiley & Sons
Access Condition Notes: Accepted manuscript available after 1 October 2023