Dynamic Impact of Unprofitable Cross-buying on Purchase Incidence and Purchase Amount

Abstract

This study investigates how unprofitable cross-buying, defined as the tendency to buy different product categories during price promotion, affects consumer decisions of whether and how much to buy in the short- and long-term periods. We utilize a type II Tobit model of purchase incidence and purchase amount and apply the model to purchase history data of an online shopping mall’s customers to capture the dynamic impacts of unprofitable cross-buying. The results reveal that unprofitable cross-buying behavior leads to lower purchase probability and purchase amount in the short-term. On the contrary, in the long-term, unprofitable cross-buying behavior appears to have positive impacts on both behavioral outcomes. Additionally, we also discovered the significant effects of customer characteristics and time variables on the extent to which customers engage in this behavior. Theoretical and managerial implications of these findings are discussed.