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Modeling Consumer Choice Among SKUs
Peter S. Fader
Bruce G.S. Hardie
Journal of Marketing Research
Volume 33, Number 4
November 1996
Abstract
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Most choice models in marketing implicitly assume that the fundamental
unit of analysis is the brand. In reality, however, many more of the decisions
made by consumers, manufacturers, and retailers occur at the level of the
stock-keeping unit (SKU). A study addresses a variety of issues involved
in defining and using SKUs in a choice model, as well as the unique benefits
that arise from doing so. It discusses how a set of discrete attributes
(e.g., brand name, package size, type) can be used to characterize a large
set of SKUs in a parsimonious manner. It is postulated that consumers do
not form preferences for each individual SKU, per se, but instead evaluate
the underlying attributes that describe each item. The model is shown to
be substantially superior to a more traditional framework that does not
emphasize the complete use of SKU attribute information. The analysis also
highlights several other benefits associated with the proposed modeling
approach, such as the ability to forecast sales for imitative line extensions
that enter the market in a future period. Other implications and extensions
also are discussed.
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