Journal of Retailing 85 (4, 2009) 425–436 A Basket-mix Model to Identify Cherry-picked Brands Leigh McAlister a,1 , Edward I. George b,2 , Yung-Hsin Chien c,∗ a Department of Marketing, CBA 7.202, McCombs School of Business, University of Texas, Austin, TX 78712, United States b Department of Statistics, The Wharton School, University of Pennsylvania, 3730 Walnut St. 4000 JMHH, Philadelphia, PA 19104-6302, United States c SAS Institute, United States Abstract Extreme cherry pickers, those shoppers who visit a target retailer infrequently and buy only a few promoted items when they do visit, reduce that retailer’s profitability. If the retailer could identify a particular brand that draws extreme cherry pickers, the retailer could use that information when negotiating with the brand’s manufacturer to obtain wholesale promotional support that compensates the retailer for extreme-cherry-picker-related losses. Researchers have been successful in developing methods to identify those shoppers who are extreme cherry pickers, but they have been less successful in developing methods that identify the brands’ that draw extreme cherry pickers. In this paper, we present a method that can determine whether a brand, when promoted, draws extreme cherry pickers. © 2009 New York University. Published by Elsevier Inc. All rights reserved. Introduction Retailers are ambivalent about loss-leader promotions. They believe that their weekly advertised promotions draw some prof- itable shoppers who would otherwise shop at a competitor’s store. They fear that those promotions also draw unprofitable shoppers who will only buy promoted items (McWilliams 2004; Urbany, Dickson, and Sawyer 2000). Recent research confirms those fears. Gauri, Sudir, and Talukdar (2008) and Talukdar, Gauri, and Grewal (2009) identify a small group of shoppers that they refer to as “extreme cherry pickers”. An extreme cherry picker shops his/her secondary store approximately every other week. When shopping at that secondary (or “cherry-picked”) store he/she buys, on average, only three items, all promoted. An extreme cherry picker is unprofitable for the cherry-picked retailer on each shopping trip and overall. In particular, these extreme cherry pickers reduce the retailer’s profit associated with a promotion by 10% (Talukdar, Gauri, and Grewal 2009). If a retailer could identify the brands that attract extreme cherry pickers, the retailer could impose quantity limits or min- imum store purchase when those brands are promoted (Inman, ∗ Corresponding author. Tel.: +1 919 531 9236. E-mail addresses: leigh.mcalister@mccombs.utexas.edu (L. McAlister), edgeorge@wharton.upenn.edu (E.I. George), Alex.Chien@sas.com (Y.-H. Chien). 1 Tel.: +1 512 471 5458; fax: +1 512 471 1034. 2 Tel.: +1 214 898 8229; fax: +1 215 898 1280. Peter, and Raghubir 1997). Further, in negotiating wholesale promotional support with those brands’ manufacturers, the retailer could seek compensation for the loss attributable to those shoppers 3 (Davis and Mentzer 2008; Sigue 2008). Unfor- tunately, published attempts to identify brands which draw extreme cherry pickers have had only limited success. While we have methods for identifying the extreme cherry picking shoppers themselves (Fox and Hoch 2005; Talukdar, Gauri, and Grewal 2009), attempts to pinpoint the particular promotion that motivated those extreme cherry pickers have been less success- ful. Researchers trying to identify brands whose promotions trigger store switching have taken two approaches. At the aggre- gate store level, researchers have asked whether the target store’s total sales increase when a particular brand is on-promotion. At the individual shopper level, researchers have asked whether the probability that a shopper will shop at the target store increases when a particular brand is on-promotion. 3 Manufacturers and retailers haggle constantly over the details of promotions. The goal of each party in these negotiations is to increase its share of the available profit. Each party uses information that seems to bolster its case to try to win concessions from the other party. The manufacturer might mention the brand’s national market share, its price elasticity and its coming advertising and coupons. The retailer might report the brand’s market share in its stores, the timeliness and accuracy of the manufacturer’s deliveries and promotions being offered by the manufacturer’s competitors. A retailer who knows that the manufacturer’s brand draws extreme cherry pickers has another point of leverage in these negotiations. 0022-4359/$ – see front matter © 2009 New York University. Published by Elsevier Inc. All rights reserved. doi:10.1016/j.jretai.2009.09.002