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The Dirichlet Model

This measures repeat buying and makes some simple assumptions eg that consumers tend to have split loyalties to each of several brands. The application of this model is associated closely with the work of Professor A S C Ehrenberg from South Bank University London.

Uses

Predicts future sales performance

Analyses degree of cannibalisation of line extensions & possible success factors for new brands

Analyses loyalty programmes

Levers

Penetration of category

Average frequency of buying category

Average number of brands bought

Market share

Limitations

Focuses on quantitative predictions

Does not explain psychological reasons for customer loyalty