Suggesting the best bundle for dairy products based on consumers’ purchase behavior

Abstract

Product bundling can be attractive for consumers and also be profitable as a marketing strategy. Based on the importance of this promotion strategy, this study estimated the effect of features on consumers’ purchase preferences among 16 dairy products available in the assortment of a popular brand by using a d-level nested logit model. Data about consumer preferences were collected from a sample of dairy products consumers in Sari City, Iran in 2018. By using the results of preferences, this study ran an optimisation algorithm according to a maximum profit criterion and suggested the best bundle for dairy products. Based on the algorithm results, the bundle including 4 out of the 16 available products had the maximum expected profit. This paper found that the profit of selling this product bundle is higher than the profit that could be obtained selling these products separately.

Keywords

• product bundling
• dairy products
• consumer preferences
• nested logit model