Oct 10, 2024
In consumer packaged goods (CPG), understanding consumer choice involves unique challenges. CPG researchers often use scanner and panel data, with existing share estimates that make even minor share shifts significant. Some key issues in CPG research are below.
- Measuring Volume
In CPG, understanding both the choice of product and the quantity purchased is crucial. However, standard methods for including quantity in choice models often fall short. - Large Numbers of Stock Keeping Units (SKUs)
CPG categories can involve a large number of SKUs, sometimes up to 500 for the top 80% of volume. Strategies for modeling choices need to consider such complexity. - Multiple Sizes and Pack Counts
CPG products come in a variety of sizes and counts, driven by marketing strategies. This variety affects patterns of competition and cannibalization, as well as price sensitivity measurement. - Purchase Versus Usage
Choice tasks often measure purchase decisions, but what often matters more is the usage occasion. Different family members may use products in different contexts, which complicates modeling. - Choice of Where to Buy
The decision of what to buy can depend on where it is purchased—whether it’s an outlet, an aisle, or online. CPG products are often available both in-store and online, adding another layer of complexity to modeling choices. - Multiple Categories
CPG products are usually bought alongside others, unlike one-off purchases like cars. This raises the question of whether choices in one category are related to choices in another. - Pricing
One of the main goals of choice modeling in CPG is understanding price sensitivity. However, affordability also plays a role, and standard models ignore this aspect, focusing only on sensitivity. - Calibration
While calibration is sometimes viewed negatively, it has practical uses in making model outputs match real-world data. Proper calibration can improve the accuracy of CPG choice models. Should you calibrate shares, price sensitivity, both, others, or nothing? - Volume Measurement
Firms use metrics like unit volume or equivalized volume (e.g., hectoliters, pounds) to track market share, which is often volume- or dollar-based. In contrast, choice models tend to calculate share based on the incidence of purchase of a small set of items, leading to discrepancies. Volume related issues are sometimes addressed in post-analysis by aggregating shares or probabilities and multiplying by a category volume number.
SUMMARY
A simpler approach works well for one-time, single-unit, same size purchases, but CPG products are purchased repeatedly, in different sizes and counts, and for different occasions. Therefore, CPG choice modeling involves not only the selection of a brand but also the choice of package size, count, price, and affordability, which are interdependent and affect consumer decisions.
