Regularities in the consumption of a subscription service

Purpose – The purchase distribution of consumer packaged goods has been extensively modelled by the negative binomial distribution (NBD). As the characteristics of packaged goods differ from those of subscription services, the latter may be a boundary condition for NBD. In this study, the authors aim to test whether NBD extends to a subscription service. Also, NBD assumes non‐heterogeneous purchase behaviour. The authors determine whether augmenting the model with a covariate (customer tenure) to account for consumer heterogeneity will produce a better fitting model. Design/methodology/approach – Phase 1 fitted a base NBD model using a random set ( n =1,546) of mobile‐telecommunication consumption (monthly billed amount). Phase 2 extended the base model by incorporating customer tenure as a covariate, and re‐fitting the model. Findings – NBD does apply to subscription markets. Also, accounting for heterogeneity in customer tenure produces a better model fit, and shows that with increasing tenure individual consumption declines but total consumption increases due to fewer light buyers. Research limitations/implications – The NBD fit suggests that mobile‐telecommunication consumption is habitual, and casts doubt on the effectiveness of marketing programs such as loyalty programs to spur the consumption. The fit also establishes that NBD can serve as a benchmark against which the effects of marketing actions can be evaluated. A potential limitation is the continuous, rather than discrete, nature of the service consumption data. Originality/value – By extending NBD's boundary condition, this study further attests to the model's robustness in modelling purchase behaviour. It illustrates the technique of augmenting the model with marketing covariates to improve model fits.