Multinomial Logit Models in Marketing - From Fundamentals to State-of-the-Art

Analysing choice behaviour has a long tradition in marketing research. Such an analysis provides valuable insights for researchers interested in understanding consumer behaviour as well as practitioners who aim to optimise their marketing-mix efforts. From this background, our paper gives an overview of the most important aspects when it comes to analysing brand choice using multinomial logit models. Starting with the theoretical foundation of choice behaviour, we move on to summarise the basic models and present the state-of-the-art extensions that account for more realistic choice behaviour. We supplement each model description with an empirical example to emphasise the advantage of each approach compared to the basic models. Finally, we summarise our key findings in the conclusions and highlight avenues for future research. In addition, we provide the estimation code in a web appendix for researchers and practitioners who want to replicate our results or analyse their own research questions using the models described in our paper.