Panel Data Measures – Household Penetration, Buying Rate, Purchase Frequency and Purchase Size

Panel Data Measures

Let’s continue with our CPG Jargon Buster Series. Having already covered ACV, %ACV, Velocity, Sales per Million, Average Items Carried and the basics of TDP, we shall now look at the 4 Panel Data measures mentioned in the title, namely Household Penetration, Buying Rate, Purchase Frequency, and Purchase Size.

Nielsen and IRI provide the numbers for these 4 measures, and even those who do not use Nielsen/IRI need to have an understanding of household-level analysis using these 4 measures.

Here are the one-line introductions:

  1. Household Penetration

How many households are buying my product?

  1. Buying Rate

How much is each household buying?

Purchase Frequency and Purchase Size are sub-components of Buying Rate.

  1. Purchase Frequency (Trips per Buyer)

(For each household) How often do they buy my product? 

  1. Purchase Size (Sales per Trip)

(For each household) How much do they buy at one time?

These 4 measures in table format can be used by managers to understand the consumer dynamics that drive the total sales for their product. Some terminologies used for this approach are: Sales Driver Analysis, Key Measures Report, Market Summary, and Purchase Summary.

Let’s understand our 4 measures in detail:

  1. Penetration

The percentage of households purchasing your products through a retailer or any channel is penetration. Take an example of Market Y containing 100 households. If 48 households buy Product X at least once during the year, the penetration of Product X in Market Y was 48%.

For a specific 

  1. Product
  2. Brand, or
  3. Category

Nielsen calls it Item Penetration. 


  1. Channels
  2. Retailers

Nielsen uses the term Shopper Penetration.

You can easily derive your sales through this formula:

Sales = (Total number of households x Penetration) x Buying Rate

Let’s move on to Buying Rate

2. Buying Rate

We explained it above as ‘How much is each household buying?’. Termed by Nielsen as ‘Item Sales per Item. Buying Rate refers to the average amount of a product purchased during the entire year (or any time period; it’s usually a year) by one household. Households are buying households only.

For example, if the annual Buying Rate of Product X is noted to be Rs. 50, this means that every household that purchased Product X spent an average of Rs. 50 over Product X during the year.

We saw the formula above, where 

Sales = (Total number of households x Penetration) x Buying Rate

Now, Buying Rate itself is dependent on 2 things:

Buying Rate = Purchase Frequency x Purchase Size 

3. Purchase Frequency (Trips per Buyer)

Nielsen calls it ‘Item Trips per Item Buyer’. How frequently your product is purchased by an average buying household over a year is purchase frequency – straightforward.

Example: Suppose the annual purchase frequency for Product X is 3.8. This means that Product X was purchased by every buying household, on average, 3.8 times over the course of the year.

4. Purchase Size (Sales per Trip)

For every buying household, what was the average amount purchased in a single trip, is purchase size. Note that the condition of ‘a single trip’ is a must. 

Nielsen calls it ‘Item Sales per Item Trip’.

For example, if the annual purchase size of Product X is 1.3, this means that every household that purchased Product X purchased 1.3 units of it in one go, each time they purchased it during the entire year. 

The Calculation Part

Assume these given set of variables:

In the last year (52 weeks) a store had 2,00,000 shoppers, out of whom 20,000 purchased your products.

Each of these 20,000 purchasers purchased your products 5 times over the year’s course, and for every purchase, they spent Rs. 30 for two 3L packets.

So now, Penetration = 20000 / 200000 = 10%

Purchase Frequency = 5

Purchase Size (Rupees) = 2 x 30(rs) = Rs. 60

Purchase Size (Units) = 2

Purchase Size (Litres)  = 2 x  3 = 6 litres

Buying Rate (Rupees) = 5 x 30(rs) = Rs. 150

Total Sales (Rupees) = 20,000 x 150(rs) = Rs. 3000000

Your total sales amounts to Rs. 30 Lacs.

Hope you were able to grasp all the concepts, and do check out our custom-made for CPG data exploration tool Explorazor. Until next time!

Leave a Reply

Your email address will not be published. Required fields are marked *