The Consumer Deviation Index: A Method for Identifying Changing Behaviors and Market Opportunities

Abstract

The increasing availability of behavioral data about consumers offers great promise for understanding their shifting preferences over time. This poses an important challenge for business practitioners - particularly entrepreneurs and investors – who wish to be the first to identify and satisfy consumers’ unmet needs. Here, we introduce the Consumer Deviation Index (CDI) as a means of generating forecasts from historical time series data in order to isolate emerging behaviors that fall outside the realm of expectation. These deviations serve as leading indicators of market opportunities to fulfill pockets of “latent demand” before they fully manifest across a consumer population. We illustrate the application of this methodology to behavior change during the height of COVID-19 stay-at-home restrictions, and to the initial reopening of the U.S. economy post-pandemic. We discuss implications for optimizing product development and innovation to better serve consumers’ ever-changing needs.