The Power of Before and After

Abstract

ABSTRACT The Dirichlet is a well-established theoretical model that describes and predicts patterns of purchasing behavior in stationary markets. This paper uses data from a highly nonstationary market to demonstrate that the Dirichlet norms also provide a baseline to interpret change in purchasing behavior—in particular, change wrought by sustained promotional activity. The empirical analysis of industrial purchasing data describes how one supplier more than doubled its share of the market. This share increase was achieved by, first, securing a higher share of the category purchases made by heavy buyers (increasing purchase frequency) before adopting a more typical growth strategy of attracting more buyers (increasing penetration).

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