Measuring Consumer and Competitive Impact with Elasticity Decompositions

Marketing investments are designed to change consumer behavior in ways that help goods compete in the marketplace. Previous research has focused on using elasticity decompositions to measure how these investments affect either consumer decision making or competing goods. On the one hand, decision-based decompositions attribute the growth in own-good demand to changes in the consumers' decision-making processes. On the other hand, unit-based and share-based decompositions attribute the same growth to either rivalrous or nonrivalrous sources. The objective of this article is to provide a clear and accurate method that simultaneously attributes the growth in own-good demand to changes in (1) consumers' decisions, (2) competitive demand, and (3) competitive market share. The author accomplishes this by settling some confusion about what the decision- and share-based decompositions mean, by discussing how each of the decompositions are related to the others, and by discussing the research questions that each of the decompositions can answer. From a managerial perspective, the author discusses how this method can be used to simplify and clarify the data needed for decision making.