Empirical regularities in average price paid across different types of households

Abstract

This research examines the relationship between the average price paid by a household for consumer packaged goods and different types of households. Using panel data that consists of approximately 17,000 households per year, we examine 24 consumer packaged goods categories across 6 years (2005–2010) to understand the way in which average purchasing price varies across five key household types or stages, and to highlight generalizability. We find systematic patterns with respect to average price paid as households pass through key household stages. The changes follow an S-shape pattern across multiple product categories. The average purchasing price declines as households move from the pre-family stage to the young family stage, increases at the older family and post-family stages, and then decreases slightly at the single elderly stage. Overall, the most significant change is from the pre-family stage to the young family stage, followed by the change from the older family stage to the post-family stage. The differences hold across multiple years. The effects, however, are larger for nonfood than for food categories. Our results suggest that in order to broaden the brand customer base, brand managers need to have a product portfolio that includes both low and high price variants as well as presence across different distribution channels to satisfy the need of different types of households.