Discrete Choice Modelling

Discrete Choice Modelling, Pricing Research - Choice set follow-on milk formula

Exhibit 16.10   A choice set used in a research study on follow-on milk formula.

Discrete choice modelling (DCM), also known as choice-based conjoint or brand price choice modelling, is the gold standard for survey-based approach to guide pricing decisions. It mirrors the real world more closely than other claimed preferences-based approaches for pricing research. In DCM, respondents evaluate multiple sets of alternatives, and choose one alternative from each of the choice sets. This task of selecting from a group of products replicates the decision-making process that consumers typically go through when making a purchase.

The choice sets must satisfy a few conditions. Firstly, the alternatives in each choice set must be collectively exhaustive, so that respondents necessarily choose an alternative from the set. The inclusion of a catch-all alternative such as “none of the above” is usually required to make a choice set collectively exhaustive.

Secondly, the alternatives must be mutually exclusive, i.e., choosing one alternative means not choosing any other alternatives. Respondents can choose only one alternative from the set.

Thirdly, the choice sets contain a finite number of alternatives, as opposed to some other modelling techniques where the dependent variable can theoretically take an infinite number of values.

In the context of pricing research, the choice sets are sets of brand/price options such as the one shown in Exhibit 16.10. Respondents are asked to select a brand from each of the choice sets used in the study.

The models may take multiple forms including multinomial logit, which is covered in the appendix to this chapter, conditional logit, multinomial probit and a number of other versions. Of considerable relevance today, due of their many advantages and growing popularity, are the hierarchical Bayes choice models.


Previous     Next

Use the Search Bar to find content on MarketingMind.







Marketing Analytics Workshop

Marketing Analytics Workshop

In an analytics-driven business environment, this analytics-centred consumer marketing workshop is tailored to the needs of consumer analysts, marketing researchers, brand managers, category managers and seasoned marketing and retailing professionals.


Digital Marketing Workshop

Digital Marketing Workshop

Unlock the Power of Digital Marketing: Join us for an immersive online experience designed to empower you with the skills and knowledge needed to excel in the dynamic world of digital marketing. In just three days, you will transform into a proficient digital marketer, equipped to craft and implement successful online strategies.