Modeling the effects of dynamic group influence on shopper zone choice, purchase conversion, and spending

Abstract

In many retail contexts, social interaction plays an important role in the shopping process. We propose a three-stage dynamic linear model that captures the influence of group discussion on shopper behavior within a hierarchical Bayes framework. The model is tested using a video tracking and transaction dataset from a specialty apparel store. The research reveals that group conversations have a significant impact on the shopper’s department or “zone” choice, purchase likelihood, and spending over time. This group influence is magnified by the size of the group (particularly for zone penetration and purchase conversion), and is also moderated by group composition and cohesiveness. The conversations of mixed-age groups and groups who stay together while shopping have a significant influence on shopper behavior across all three stages, while discussions by adult groups exhibit a marginal carryover effect for purchase conversion. When shoppers have repeated discussions in a specific department, they are more likely to return to and buy from this department, while the cumulative number of discussions in the store drives higher spending levels. We also observe that group shoppers visit more departments than their solo counterparts; and mixed-age groups and solo shoppers are more likely to buy than adults-only or teen groups. This study has important implications for how retailers manage shopper engagement and group interaction in their stores.

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Notes

  1. 1.

    Although we have shopper path and social influence (e.g., crowding) information, they are not zone-specific and hence will not impact the shopper’s zone choice (Cameron and Trivedi 2005). Therefore, we do not include these variables in the zone choice utility function. However, we do incorporate them into the shopper’s purchase conversion and amount equations.

  2. 2.

    In order to avoid estimation of too many parameters in Eq. 2, we only allow the intercept and carryover effect (αji0, αji1) to be zone- and individual-specific and moderated by group composition and cohesiveness. We also tried the model with full zone and individual heterogeneity for all parameters in Eq. 2, but its performance was much worse and unstable.

  3. 3.

    To show that the increased purchases are due to group conversations and not shopper self-selection, we also examined the effect of talk frequency by using propensity score matching on mixed-age groups (Rosenbaum and Rubin 1983). Results show that group conversations (from zero to nonzero) significantly increase sales in a zone by $4.92 on average from $0.12 to $5.04, confirming the causal effect of group conversations on sales (see details in Web Appendix 7). The average treatment effect (causal effect) is $4.88 (Std. error 1.45).

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Correspondence to Shibo Li.

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J. Andrew Petersen served as Area Editor for this article.

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Zhang, X., Li, S. & Burke, R.R. Modeling the effects of dynamic group influence on shopper zone choice, purchase conversion, and spending. J. of the Acad. Mark. Sci. 46, 1089–1107 (2018). https://doi.org/10.1007/s11747-018-0590-9

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Keywords

  • Shopper marketing
  • Social influence
  • Shopping group
  • Dynamic linear model
  • Preference revision
  • Hierarchical Bayes model