The China Casebook

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A new brand choice model incorporating a choice set formation process

This paper develops an individual-level choice model which embeds a rational choice set generation process. Choice set generation is conceptualised as a process in which the consumer makes uncertain judgments about the ability of brands to meet the consumption or usage goal motivating the choice decision. Brand selection is modeled as the joint maximization of that ability and the brand's relative value (or relative attractiveness) which the individual consumer assesses at the time of choice and independently of any usage or consumption goal. Derivations are provided for a flexible and parsimonious representation of the choice probabilities which are not characterized by the IIA property. Empirical results using scanner data and survey-based awareness data for a single product category provide support for the model. Apart from enriching the behavioral insight into the brand choice decision, the results show that not recongnising unequal substitutability among brands arising from their differential ability to meet the usage/consumption goal leads to non-optimal marketing mix decisions