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Theoretical Modeling in Marketing
Author(s): K. Sridhar MoorthySource: The Journal of Marketing, Vol. 57, No. 2 (Apr., 1993), pp. 92-106Published by: American Marketing AssociationStable URL:
K. Sridhar Moorthy
Theoretical Modeling in
Marketing
Over the last 10 years or so, theoretical modeling has rapidly become an important style of research in
marketing. To many people, however, this style is still a mystery. This article is an attempt at explaining
theoretical modeling. The author argues that even though theoretical modeling is quantitative, it is closer
to behavioral marketing in purpose and methodology than to quantitative decision support modeling.
Whereas behavioral marketing involves empirical experiments, theoretical modeling involves logical experiments.
Using this framework, the author addresses such issues as the internal and external validity
of theoretical models, the purpose of theoretical modeling, and the testing of model-based theories. The
agency theory explanation of salesforce compensation is used as a case study.
N essentially new style of research has sprung up
in marketing recently: mathematical theoretical
modeling. Scarcely an issue of Marketing Science
passes without an article in this style. Some examples
are the articles by McGuire and Staelin (1983), Moorthy
(1984), Basu et al. (1985), Mahajan and Muller
(1986), Hess and Gerstner (1987), Hauser (1988),
Wilson and Norton (1989), and Rao (1990). Lately,
In the title of the article and elsewhere, “mathematical” is dropped
and the term “theoretical modeling” is used. A theoretical model need
not be mathematical (cf. the verbal and graphic models in “behavioral
marketing”: Bettman 1979; Puto 1987; Sujan 1985; Wright 1975) and
a mathematical model need not have a theoretical purpose. For example,
most mathematical models in marketing are really measurement
models-models set up to estimate demand functions (Hanssens,
Parsons, and Shultz 1990).
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theoretical modeling seems to have invaded the Journal
of Marketing Research as well (e.g., Hauser and
Wererfelt 1989; Lal 1990; Wilson, Weiss, and John
1990).
To the nonparticipant, the popularity and growth
of theoretical modeling may seem like an oddity, a
passing fad. The method seems to violate all the norms
of good research. The articles are (generally) all theory,
no data. The assumptions are unrealistic. Managerial
implications are difficult to find. To make
matters worse, the reader must wade through countless
lemmas, propositions, theorems, proofs. It is legitimate
to ask: What is all this in aid of? How does
the methodology work? Why is it useful to marketing?
How can we apply these models? How can we test
these models? How does quantitative theorizing differ
from the verbal theorizing in the “behavioral” literature