The perils of category management: The effect of product assortment on multicategory purchase incidence

Hong, Sungtak; Misra, Kanishka; Vilcassim, Naufel J.

Retailers determine the assortment for a mix of product categories in a particular space (e.g., the checkout aisle, endcaps, freezer space). Within such a “target” space, shoppers are exposed to a selection of product categories that are not necessarily correlated in consumption. In this article, the authors examine whether the assortment of one category affects consumers’ purchase incidence decision in another, independent category that shares a common display space (e.g., frozen meals and ice cream). They use a multivariate probit model of purchase incidence and incorporate assortment variety captured by an entropy measure. Results from analyses of IRI data and an online experiment provide strong evidence that consumers are less likely to purchase from a category of a given assortment when it is presented with another category assortment of greater variety and that this effect is driven by the display proximity. Furthermore, results from an eye-tracking study indicate consumers’ allocation of limited attention to category assortments as an explanation for the finding. This work serves as one of the first studies to document the impact of product assortment beyond a focal category, and the results highlight a limitation of individual category management when grocery retailers make product assortment decisions.