Replacement Timing and Brand Switching of Consumer Durables

Abstract

This paper proposes a model that answers some questions on the replacement behavior of consumer durables : when and why a consumer replaces his or her existing product with a new one, and to which brand or to which maker he or she switches. We consider current product used as alternative benchmark in addition to other consumer durable goods in order to incorporate the replacement need arousal process of consumer durables. To analyze the dynamics of replacement timing, we suppose that the utilities of existing products and other new ones vary over time, and the time-varying utilities are affected by hazard rate, switching cost and time-dependent marketing variables. To make brand switching and brand selection behaviors trackable, we adopt a switching-cost variable and use the MNL model. In the empirical section, we applied our model to the replacement behaviors of consumers who have experienced replacing their mobile telephone terminals, and we found that our model predicts and fits well the replacement timing of mobile telephone terminals and brand switching results observed. Therefore, we concluded that the replacement need arousal process and replacement timing of consumer durables is predicted well by our utility dynamics assumption that current products used should be considered as alternatives like other new consumer durable goods in the evoked set. Additionally, brand switching and brand choice behaviors can be explained well by time-varying marketing mix variables and switching cost.