Structural models of brand loyalty with an application to the automobile market

Although several studies have found that past purchases are important determinants of a consumer’s current purchase, there is disagreement whether past purchases are capturing brand loyalty or consumer heterogeneity. This article addresses the question of consumer heterogeneity, explores the relationship between brand loyalty and singleton choice sets and estimates alternative structural models that are based on the common assumption that consumers are of two types: brand loyals and shoppers, who face the entire set of available choices. Employing data from a 1989 J.D. Power and Associates survey of new vehicle buyers, aggregate switching and logit captivity/DOGIT models are estimated and comparatively evaluated in holdout testing. Among the results, there is evidence that new vehicle purchasers are brand loyal but that brand loyalty may be overestimated if the model fails to control for availability constraints. Further, a parametrized logit captivity model finds that male and college-educated consumers are important determinants of singleton choice sets.