Identifying segments with identical choice behaviors across product categories: An Intercategory Logit Mixture model

Because consumers are limited information processors seeking to conserve cognitive energy, it is likely that at least some use identical decision heuristics across product categories. This study develops a finite mixture logit model that identifies segments of households with identical behaviors across product categories. The proposed model is shown to fit in-sample choices and forecast out-of-sample choices at least as well as an unrestricted model in which all choice behaviors are independent across product categories. The results show that about 32% of the sample households have choice behaviors that are identical across at least two of the three product categories studied, while the remaining households have choice behaviors that are independent across all three categories. The empirical results show that the segment with identical behaviors is quite price sensitive, not at all sensitive to store feature advertising, and not very brand- or size-loyal. These households are more likely to have larger families and marginally lower incomes and to shop less frequently and spend less per shopping trip. They are also lighter users in two of the three product categories investigated. Implications of the model for manufacturers and retailers are discussed. (C) 2002 Published by Elsevier Science B.V.