Market Analysis of Choice-Based-Conjoint Study - Assignment Example

MARKET ANALYSIS Results Conjoint analysis is regarded as a market research tool that is used for developing an effective product design that represents aspects that are desired by and attractive to the customers (Wiley, 2010, p. 34). This results section demonstrates the findings of the Choice-Based-Conjoint study conducted by the selected research team with an indication of the best-suited choice that can be taken up by the company as it aims to venture in to the wine category. In order to finalize the goals and the purpose of the study, I conducted a thorough analysis into the data prepared by the research team using conjoint model. In the course of the Choice-based study, I looked at three main attributes: Region, Brand and Price. Each attribute had two main options. Region had a not well-known region and well known region. Brand had a not well-known brand and well-known brand. Finally, price had low and high price. Each choice set was accompanied by three distinct alternatives. The two options assigned to each factor were based on the evaluation of the desired choice. In conjoint analysis, the two options are referred to as levels. To be able to have a clear understanding of the attributes and levels of the product (wine) each attribute encompassed a number of aspects. For instance, brand included aspects such as the producer, distributer and the retailer while region mainly represented the location of the product that is the manufacturing place and distribution place. The advantage of using a conjoint analysis is because it provides a choice that is discrete and it is able to put a dollar value on the attributes and their levels. This study adapted a choice based conjoint category where every respondent selects only one alternative based on the on a given choice set. However, the choices may tend not to contain all the alternatives (Wiley, 2010, p.36). Below is a table showing a summary of the product attributes and the levels that were tested in this analysis: Alternative Region Brand Price 1           Low 2 High 3 Well known Low 4 Well known High 5 Well known Low 6 Well known High 7 Well known Well known Low 8   Well known   Well known   High Given the choice set of the response alternatives for the eight choice design set, the conjoint model is mainly used to determine the overall best alternative based on the choices within the attribute utility scores. A choice set refers to a set of alternatives. In the course of determining the best alternative, the respondent may not be in a position to use all the alternatives that are present. The utility scores derived from the Choice-Based study with an increase of $ 5 in price are represented in the table below: Increase in utility as region changes from not well known to well known 0.54 Increase in utility as brand changes from not well known to well known 0.33 Increase in utility as price increases from $x $x+5 is -0.79 The table below shows the utility scores based on the three attributes, the levels of each attribute and the alternatives undertaken by each attribute. Alternative Region Brand Price Utility 1 Low +b0 0.00 2 High +b0 +b3 -0.79 3 Well known Low +b0 +b2 0.33 4 Well known High +b0 +b2 +b3 -0.47 5 Well known Low +b0 +b1 0.54 6 Well known High +b0 +b1 +b3 -0.25 7 Well known Well known Low +b0 +b1 +b2 0.87 8 Well known Well known High +b0 +b1 +b2 +b3 0.08 Each attribute level score together with the scores of the other attribute levels can determine the best alternative to take in determining the market share. This is a clear indication that the conjoint analysis model is quite representative. With wine it is often the case that price indicates quality so if the price is high, it is an indication that the quality of the wine is quite good compared to that of a low price. Therefore, the best alternative to use will mostly depend on the price attribute. The attribute levels derived from each attribute are quite significant in determining the attractiveness of the best alternative to use based on the product configurations. The results from the levels scores are calculated to demonstrate the importance of an attribute average. Even though the calculations are subjected to price sensitivity, conjoint analysis does not address the attribute as a product feature that is isolated. Calculation of preference Alternative Region Brand Price Utility Exponential of utility 1 Low +b0 0.00 1.00 2 High +b0 +b3 -0.79 0.45 3 Well known Low +b0 +b2 0.33 1.39 4 Well known High +b0 +b2 +b3 -0.47 0.63 5 Well known Low +b0 +b1 0.54 1.72 6 Well known High +b0 +b1 +b3 -0.25 0.78 7 Well known Well known Low +b0 +b1 +b2 0.87 2.39 8 Well known Well known High +b0 +b1 +b2 +b3 0.08 1.08 TOTAL 9.43 In conjoint analysis, the partworths are calculated in order to convert the price attribute to a dollar value. It should be noted that this is only possible if the price feature is an attribute. The tables below indicate the results of the calculations of the partworths: Change in price $5 Change in utility -0.79 This table shows the increase in price which is expected which is $5 and the change in utility. Value in dollar of one unit of utility $6.31 This table indicates the value dollar of one unit of utility depicted from the change in price and change in utility. Value in dollars as region changes from not well known to well known $3.42 Value in dollars as brand changes from not well known to well known $2.07 This table indicates the value in dollars of the attributes: region and brand based on their conversion from one level to another. To be able to determine the total sales that the company will receive based on the product to be introduced, there was need to conduct an estimate of the potential market share. Market share is referred to as the percentage of a company or the total sales of a market that are earned within a specific timeframe (Orme, 2006, p. 51). Market share is usually estimated by calculating the company’s sales against the timeframe and dividing it with the total sales within the same timeframe. With the wine being the newly looked at product venture it is important that the chosen alternative will be able to have an added advantage in the market with regards to the market share. The most recognized advantage of market share is the fact that it is able to increase and permit the company to obtain a great scale in conducting its operations as well as improving profitability (Orme, 2006, p.53). Based on the current market situation, only three of the alternatives were available, that is, alternative 2, 4 and 7. However, I decided to adopt one more alternative for the calculation of the market share. To do this I had to conduct an analysis of the remaining 5 alternatives and decide upon which I would select as the best alternative to add. In this context, I estimated the market share by first calculating the utility of each alternative, getting the sum of all the exponentials of utility and finally, dividing every alternative exponential of the utility by the sum of all the exponentials of utility. The table below shows a summary of the calculation of the market share for each of the eight alternatives: Alternative Region Brand Price Utility Exponential of utility Choice probability Market share 1 Low +b0 0.00 1.00 0.11 11% 2 High +b0 +b3 -0.79 0.45 0.05 5% 3 Well known Low +b0 +b2 0.33 1.39 0.15 15% 4 Well known High +b0 +b2 +b3 -0.47 0.63 0.07 7% 5 Well known Low +b0 +b1 0.54 1.72 0.18 18% 6 Well known High +b0 +b1 +b3 -0.25 0.78 0.08 8% 7 Well known Well known Low +b0 +b1 +b2 0.87 2.39 0.25 25% 8 Well known Well known High +b0 +b1 +b2 +b3 0.08 1.08 0.11 11% TOTAL 9.43 1 100% Generally the results from this survey indicates that the best leading alternative is 5 which has a higher market share of 33% as compared to the other alternatives which have 23%, 29%,18% and 24% respectively. Therefore, based on the analysis it is clear that alternative 5 is the best for the company to use in entering the market since it has the highest market share with Region: well-known, Brand: not well known and Price: low as a result of having a higher choice of probability. The new alternative will assist the company to increase and also obtain a great scale in conducting its operations as well as improving profitability. Below is a table showing the results for alternative 5: Alternative Exponential of utility Choice probability Market share 2 0.45 0.09 9% 4 0.63 0.12 12% 7 2.39 0.46 46% 5 1.72 0.33 33% Total 5.19 1 100% References Orme, B.K. (2006). Getting started with conjoint analysis: strategies for product design and pricing research. Madison, Wis, Research Publ. LIc. Wiley, J.B., Raghavarao, D., & Chitturi, P. (2010). Choice-based conjoint analysis: models and designs. Boca Raton, CRC Press. Read More