Customer basket heterogeneity: how to measure it and some possible business applications

Ruben Nicolas-Sans and Daniel González Ibáñez

Economic Research-Ekonomska Istraživanja, 2021, vol. 34, issue 1, 2572-2592

Abstract: Companies offering a wide range of products may have an interest in measuring the degree of diversity of their clients’ shopping baskets as an indicator of consumer behaviour. Customers buying a wide range of products are somehow more dependent on the business and their switching costs might be higher compared to others that only buy a small number of products from your catalogue. We aim to provide companies with a tool to measure how heterogeneous their clients are in terms of the composition of their shopping basket. First, the objective of this paper is to take advantage of some approaches used in other fields to create a new measurement. Second, we will show some possible applications of this indicator in a business context. We consider that a client with low heterogeneity is not highly dependent on the business and is more likely to defect. To check if this intuition is true, we will test the dependence of heterogeneity and churn with real data. By proving our hypothesis, we will be potentially enriching churn models with a new explanatory variable, and we could prevent the defection of those clients scoring low heterogeneity by making the appropriate marketing decisions.

Date: 2021
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DOI: 10.1080/1331677X.2020.1835518

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