Predicting home-appliance acquisition sequences: Markov/Markov for Discrimination and survival analysis for modeling sequential information in NPTB models

The acquisition process of consumer durables is a ‘sequence’ of purchase events. Priority-pattern research exploits this ‘sequential order’ to describe a prototypical acquisition order for durables. This paper adds a predictive perspective to increase managerial relevance. Besides order information, the acquisition sequence also reveals precise timing between purchase events (‘sequential duration’) as examined in the literature on durable replacement and time-to-first acquisition. This paper bridges the gap between priority-pattern research and research on duration between durable acquisitions to improve the prediction of the product group the customer might acquire his next durable from, i.e. Next-Product-to-Buy (NPTB) model. We evaluate four multinomial-choice models incorporating: 1) general covariates, 2) general covariates and sequential order, 3) general covariates and sequential duration, and 4) general covariates, sequential order and duration. The results favor the model including general covariates and duration information (3). The high predictive value of sequential-duration information emphasizes the predictive power of duration as compared to order information.