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Research Details

Do Harbinger Products Signal Which New Customers Will Stop Purchasing?

Abstract

High customer spending is generally a positive signal of future customer spending at the same retailer. We show that there exist “Harbinger Products” for which the reverse is true. The more customers spend on these products the less likely these customers are to return to that retailer. The finding is robust and pervasive. We identify harbinger products at six different retailers: a packaged goods retailer, two wholesale clubs, a book retailer, an online home goods retailer, and an apparel store. We propose three explanations for the harbinger product effect. Using data for one retailer, we rule out explanations that the products are defective or over-priced. Instead, at this retailer, harbinger products are a good fit for the preferences of some customers but a bad fit for other customers. We show that discontinuing harbinger products would be a mistake as they contribute a lot of revenue. Instead, harbinger products can help this retailer identify where to broaden its assortment. Retailers have to prioritize when expanding their assortments, and harbinger products can help them do so.

Type

Working Paper

Author(s)

Eric T. Anderson, Duncan Simester, Chaoqun Chen, Ayelet Israeli

Date Published

2019

Citations

Anderson, T. Eric, Duncan Simester, Chaoqun Chen, and Ayelet Israeli. 2019. Do Harbinger Products Signal Which New Customers Will Stop Purchasing?.

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