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). The authors address a variety
of issues involved in defining and using SKUs in a choice model, as we
ll as the unique benefits that arise from doing so. They discuss 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.
They postulate that consumers do not form preferences for each indivi
dual 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. Their analysis also highlights several
other benefits associated with the proposed modeling approach, such as
the ability to forecast sales for imitative line extensions that ente
r the market in a future period, Other implications and extensions als
o are discussed.