Impact of Healthy Alternatives on Consumer Choice: A Balancing Act

• Consumers ‘balance’ their choice of healthy and regular products based on specific health concerns.
• We estimate a heterogeneous multi-category choice model nested within an augmented latent class structure.
• We use scanner panel data and survey data including an individual ‘health orientation score’.
• Results indicate the presence of ‘Healthy’, ‘Balancing’ and ‘Hedonic’ segments across different health elements.
• A study of price elasticities reveals significant implications for promotional strategy.

While consumer screening of nutritional information as well as general health concerns have been on the rise, whether such concerns are reflected in purchasing behavior is not quite as certain. We postulate this disconnect between health concerns (more specifically concerns with fat, salt and sugar elements) and consumption behavior to stem from balancing behaviors exhibited by consumers. We address this issue through three core questions: (1) Are there certain segments of consumers who, given a focal health element, balance their purchases between healthy and regular versions of products across categories? (2) Is this balancing behavior consistent across different elements of health concern? And, (3) is a consumer's stated health orientation consistent with actual purchase behavior? We estimate a multi-category product choice model nested within an augmented latent class structure using scanner panel data and supplemented with survey based constructs obtained from the same consumers. We find evidence of significant balancing behavior across segments and also across different health elements. We show that our findings have significant implications for retail and manufacturer strategy as well as for public policy.

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