Consider this scenario — a shampoo brand, Pantene, wants to launch a new variant with hair fall control (HFC) properties. How much premium may be charged for this additional feature?
Take another example — Kunst, a vacuum pump brand, has a unique advantage. Unlike other vacuum pumps, this brand does not require the user to change oil on a periodic basis. What is the perceived value of this product feature?
As for Pantene, according to the brand’s website, the Hair Fall Control variant contains keratin damage blockers that helps prevent hair breakage caused by damage, resulting in up to 98% less hair fall when used daily.
This sounds like something consumers might be willing to pay more for, and conjoint analysis can assess how much more.
According to the results shown in Exhibit 26.11, profile C with HFC, priced USD 12.50 has the same utility as profile A, Pantene sans HFC. We can infer that since price and HFC are the only two attributes that differ, the value an average consumer associates with HFC is USD 2.50.
In these examples, the price is determined by trading feature for price.
|Attributes||Levels||Part-Worth||Importance||Relative Importance %|
Referring to Exhibit 26.12, the part-worth for price of shampoo varies from –2.4 at USD 18.00 to +2.4 at USD 8.00. The range (4.8) is 4 times larger (more important) than that for HFC (1.2).
Assuming a linear utility relationship for price, the perceived value of HFC is one-fourth the price difference (USD 18.00 – USD 8.00). This is equal to (18.00 – 8.00)/4 = USD 2.50.
When using conjoint analysis in this context, beware of the interaction effects. If for instance, Pantene was considering what to charge for an anti-dandruff variant, it would be prudent to exclude Head and Shoulder from the analysis, because of its strong association with anti-dandruff properties, might distort the results.
It is also important to remember that the market is heterogeneous, that not all consumers are interested in a shampoo with HFC properties. So if Exhibit 26.12 pertains to all respondents, the estimated value of USD 2.50 is an underestimate. The exercise should be repeated after filtering the data so that it only includes respondents who reveal a significant interest in the HFC variant. (Incidentally, adaptive conjoint, refer section Adaptive Conjoint Analysis, in Chapter 10, Product Design, is appropriately designed for this purpose.
Note: To find content on MarketingMind type the acronym ‘MM’ followed by your query into the search bar. For example, if you enter ‘mm consumer analytics’ into Chrome’s search bar, relevant pages from MarketingMind will appear in Google’s result pages.
Marketing has changed. More so in practical terms, and marketing education is lagging.
The fundamental change lies in the application of analytics and research. Every aspect of the marketing mix can be sensed, tracked and measured.
That does not mean that marketers need to become expert statisticians. We don't need to learn to develop marketing mix models or create perceptual maps. But we should be able to understand and interpret them.
MarketingMind helps. But the real challenge lies in developing expertise in the interpretation and the application of market intelligence.
The Destiny market simulator was developed in response to this challenge. Traversing business years within days, it imparts a concentrated dose of analytics-based strategic marketing experiences.
Like fighter pilots, marketers too can be trained with combat simulators that authentically reflect market realities.
But be careful. There are plenty of toys that masquerade as simulators.
Destiny is unique. It is an authentic FMCG (CPG) market simulator that accurately imitates the way consumers shop, and replicates the reports and information that marketers use at leading consumer marketing firms.
While in a classroom setting you are pitted against others, as an independent learner, you get to play against the computer. Either way you learn to implement effective marketing strategies, develop an understanding of what drives store choice and brand choice, and become proficient in the use of market knowledge and financial data for day-to-day business decisions.