A flexible model for consumer choice in packaged goods markets

Modelling brand demand at the level of individual choice decisions is a central issue in market research and the multinomial legit has become a predominant framework. But the uniform patterns of brand substitution that flow from the legit model limit its ability to reflect the structure of consumer preferences in today's markets characterised by high levels of market segmentation and product differentiation. In this paper, the heteroscedastic extreme value model is described and applied to a panel dataset. Its flexibility is shown better to approximate the structure of demand in markets with a variety of brands with different characteristics and appealing to different consumer segments. The model permits differential substitutability among competing brands and yields useful diagnostics for strategic brand management.