© Qian XU

MarketingManagementSession10

QianXU,PhD.Spring,2017

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Part1Teampresentation

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Part2My presentation

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2.1Design:Choice-basedConjoint(CBC)•Product:Smartphone•5attributes,3-6levelsforeachattribute•Potentialprofiles:6×3×4×3×6=1296

Attribute Brand Screen Memory Lock Price (RMB)

Level

Apple 4.5’’ 16G Fingerprint 1,000Samsung 5.7’’ 64G Pupil 2,000

Mi 6.8’’ 128G Both 3,000Huawei 4,000Oppo 5,000Vivo 6,000

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2.2Survey:self-reportedpreference

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• 20choicesintotal

6

2.2Survey:productchoice

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•Samplesize:N=45•Method:multinomialLogit(MNL)model

2.3Analysis

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MultinomialLogit(MNL)model

•Probabilitytochoose𝑐Qamong themalternatives:

𝑝 𝑐Q 𝐶 = exp(𝑈 𝑐Q )

∑ exp(𝑈(𝑐Y))ZY[\

=exp(𝑥Q𝛽)

∑ exp(𝑥Y𝛽)ZY[\

𝑈 𝑐Q =𝑥Q𝛽:theutilityforalternative𝑐Qj:thetotalnumberofalternatives𝑥Q:vectorofattributesofalternativei𝛽:vectorofunknownparameter,estimatedstatistically.

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2.4Output

•Utilityofeachlevelforeachattribute•Relativeimportanceofeachattribute•Marketsharesimulation

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2.4.1 Utilityofeachlevelforeachattribute

•Attribute:•Brand•Screen•Memory•Lock•Price

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1)LevelutilityforBrand

68.94

19.13

-29.8

28.74

-39.01-48.01-60

-40

-20

0

20

40

60

80

Apple Samsung Mi Huawei Oppo Vivo

Appleisdominating.Huaweiisnotbad.

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2)LevelutilityforScreenForscreen,notthelarger,thebetter.

-5.17

10.97

-5.8-8-6-4-2024681012

4.5' 5.7' 6.8'

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Self-reportedmeasure

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2)LevelutilityforScreen

•Sometimes,self-reportedpreferenceisnottrustworthy.

1.84

2.22 2.29

0

0.5

1

1.5

2

2.5

4.5' 5.6' 6.8'

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3)LevelutilityforMemoryFormemory,thelarger,thebetter.But128Gisnottwicebetterthan64G.

-94.75

37.6357.12

-120-100-80-60-40-20020406080

16G 64G 128G

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4)LevelutilityforLockFormemory,thelarger,thebetter.But128Gisnottwicebetterthan64G.

-2.98

-9.44

12.42

-15

-10

-5

0

5

10

15

Fingerprint(指纹解锁) Pupil(瞳孔解锁) Both(指纹和瞳孔均可解锁)

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5)LevelutilityforPriceThecheaper,thebetter.

47.12

22.55

4.12

-8.11

-23.38

-42.31-50-40-30-20-100102030405060

¥1000 ¥2000 ¥3000 ¥4000 ¥5000 ¥6000

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5)LevelutilityforPriceForourEMBAstudents,thecheaper,thebetter.Butthedifferencebetween¥2000and¥3000isverysmall.

53.5

5.1

-8.1

-50.4-60

-40

-20

0

20

40

60

¥1000 ¥2000 ¥3000 ¥4000

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2.4.2Attributeimportance•Whichattributeismoreimportant?

32.75%

31.00%

17.89%

9.80%

8.57%

0.00% 10.00% 20.00% 30.00% 40.00%

Brand(品牌)

Memory(内存大小)

Price(价格)

Screen(屏幕尺寸)

Lock(解锁功能)

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2.4.2 Individualattributeimportance

Price

Brand

Screen

Memory

Lock

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2.4.3Marketsharesimulation

𝑀𝑎𝑟𝑘𝑒𝑡𝑠ℎ𝑎𝑟𝑒 = exp(𝑟o)

∑ exp(𝑟o)po[\

𝑟o = 𝑢𝑡𝑖𝑙𝑖𝑡𝑦𝑜𝑓𝑎𝑙𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑣𝑒𝑘= 𝑝𝑎𝑟𝑡𝑤𝑜𝑟𝑡ℎ𝑜𝑓𝑙𝑒𝑣𝑒𝑙𝑖𝑓𝑜𝑟𝑎𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑒1+ 𝑝𝑎𝑟𝑡𝑤𝑜𝑟𝑡ℎ𝑜𝑓𝑙𝑒𝑣𝑒𝑙𝑗𝑓𝑜𝑟𝑎𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑒2 …

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2.4.3Marketshare46.9%

24.1%29.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Apple Mi Huawei

6.8' 6.8' 6.8'

128G 64G 64G

Fingerprint Fingerprint Fingerprint

¥6000 ¥2000 ¥4000

Iftherewereonly3productsinthemarket,thesimulatedmarketsharewillbelikethis:

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2017Q1Marketshareat1st tiercities(China)

31.80%

7.80%

14.50%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Apple Mi Huawei

Source:极光大数据

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1)IfHuaweiaddspupillock

46.9%

24.1%29.0%

42.8%

21.3%

35.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Apple Mi Huawei

6.8' 6.8' 6.8'

128G 64G 64G

Fingerprint Fingerprint Fingerprint→Both

¥6000 ¥2000 ¥4000

Originalshare Newshare

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1)Decisions

•Themarketsizeof2017Q1is0.11billionsmartphones.(byiiMedia Research)•ProfitmarginforHuawei:7.7%(byTheInformation)

•ForHuawei,addingpupillockmeans:• Cost:- 0.03billionRMBdevelopment(fixedcost),0.3%margin(variedcost).•Benefit:marketshareincreasesfrom29%to35.9%•Benefit– Cost=(35.9%-29.0%)*0.11*4000*(7.7%-0.3%)- 0.03

=1.8billionRMB.

•Finaldecision:YES

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46.9%

24.1%29.0%

45.0%

21.7%

33.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Apple Mi Huawei

6.8' 6.8' 6.8'

128G 64G 64G

Fingerprint Fingerprint Fingerprint

¥6000 ¥2000 ¥4000→¥3000

Originalshare Newshare

2)IfHuaweireducesprice

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2)Decisions

•Themarketsizeof2017Q1is0.11billionsmartphones.(byiiMediaResearch)

•ProfitmarginforHuawei:7.7%(byTheInformation)

•ForHuawei,reducing1000RMBpersmartphonemeans:• Cost:-1000RMBpersmartphone(variedcost).•Benefit:increasedmarketshare• profitincrease=(33.3%*4000RMB- 29.0%*3000)*0.11*7.7%

=-0.14billionRMB.

•Finaldecision:NO

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46.9%

24.1%29.0%

51.7%

22.7% 25.6%

0.0%10.0%20.0%30.0%40.0%50.0%60.0%

Apple Mi Huawei

6.8' 6.8' 6.8'

128G 64G 64G

Fingerprint→Both Fingerprint Fingerprint

¥6000 ¥2000 ¥4000

Originalshare Newshare3)IfAppleaddspupillock

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2)Decisions

•Themarketsizeof2017Q1is0.11billionsmartphones.(byiiMediaResearch)

•ProfitmarginforApple:30%(byTheInformation)

•What’sApple’sdecision?

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Part3Conjointanalysis

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Today’sobjectives

•Toknown:•Whatisconjointanalysis•Whatitcando.

•Tounderstand:•Whyitisimportant•Howitworks.

•Toact:•Beyondthescopeofthiscourse•Teachyourselfwithrecommendedreadingorgoogle

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3.1Definition

•Conjointanalysis(联合分析)

CONsider attributesJOINTly

•PaulE.Green(1978)

•Green, P. and Srinivasan, V. (1978) Conjoint analysis in consumer research: Issues and outlook, Journal of Consumer Research, vol 5, September 1978, pp 103–123.

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Atypicalchoicetask

Attributes

Levelsforeachattribute

Twoproductprofiles

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3.2.1Basiclogic:LevelutilityA B

Brand Apple Apple

Screen 4.5 inch 5.7 inch

Memory 128G 128G

Lock Fingerprint Fingerprint

Price ¥5000 ¥6000

Choice ✔

Theutilityincreasefrom4.5to5.7inch≥ 1000𝑅𝑀𝐵

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3.2.1Basiclogic:LevelutilityA B

Brand Apple Apple

Screen 4.5 inch 5.7 inch

Memory 128G 128G

Lock Fingerprint Fingerprint

Price ¥5000 ¥7000

Choice ✔

Theutilityincreasefrom4.5to5.7inch< 2000𝑅𝑀𝐵

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3.2.1Basiclogic:Levelutility

•Bymanycomparisons,wemanagetocalculatetherelativeutilityofeachlevelforeachattribute.

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3.2.2Basiclogic:Attributeimportance

•Whichattributeismoreimportant?

Minimumutility Maximumutility Attributeutilityrange

Brand 99 -118 217

Screen 0.88 -0.36 1.24

Memory 61 -106 167

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3.2.2Basiclogic:Attributeimportance

•Towhombrandismoreimportant?

Minimumutility Maximumutility Attributeutilityrange

Student A 99 -118 217

StudentB 37 -77 114

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3.2.2Basiclogic:Attributeimportance

•Thebiggertheutilityrangeis,themoreimportantthisattributeis.

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3.2.3Basiclogic:Marketshare

𝑀𝑎𝑟𝑘𝑒𝑡𝑠ℎ𝑎𝑟𝑒 = exp(𝑟o)

∑ exp(𝑟o)po[\

𝑟o = 𝑢𝑡𝑖𝑙𝑖𝑡𝑦𝑜𝑓𝑎𝑙𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑣𝑒𝑘= 𝑢𝑡𝑖𝑙𝑖𝑡𝑦𝑜𝑓𝑙𝑒𝑣𝑒𝑙𝑖𝑓𝑜𝑟𝑎𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑒1+ 𝑢𝑡𝑖𝑙𝑖𝑡𝑦𝑜𝑓𝑙𝑒𝑣𝑒𝑙𝑗𝑓𝑜𝑟𝑎𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑒2 …

Thelargerthetotalutilityforoneproduct,thelargerthemarketshareitwillgain.

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3.3Whydoweneedconjointanalysis?

•Newproductdevelopmentwithoutpricingmeansshit.•脱离定价谈新产品开发都是耍流氓！

•Askingconsumershowmuchtheywouldliketopayforthenewfeatureiswaydifferentfromtheirdailyconsumption.•Tradeoffsbetweenattributes• Interactionsbetweenattributes

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3.3Whydoweneedconjointanalysis?

•Whatconjointanalysiscando?

• Newproductdevelopment• Pricing

Utilityofeachlevelforeachattribute

• Newproductdevelopment• STP

Relativeimportanceofeachattribute

• Newproductdevelopment• Marketstrategy

Marketsharesimulation

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3.4Othertypesofconjointanalysis

•Rating-based:•Howmuchdoyoulikethisproduct?1-7•Howmuchwouldyouliketopayforthisproduct?

•Ranking-based•Pleaserankthefollowingproducts.

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3.5Improvementforconjointanalysis

•Whethertheycangetthemealtheyhavechosen.

-0.5

0

0.5

1

1.5

2

Water Sauce Shrimp Chocolatesnackbar

Utility

Hypothetical Incentivealigned

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3.5Improvementforconjointanalysis

•Incentivealignedconjointanalysiscangiveyoumorerealisticresponses.

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Take-aways

•Surveyingcustomerssometimeswillgiveyouwrongresults

•Conjointanalysistakeconsumers’tradeoffsamongattributesintoconsideration.

•Ifapplicable,incentivealignedconjointanalysisisbetter.

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Part4RemainingissuesinNewProductDevelopment

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4.1Whotodevelopthenewproduct

R&DMKT

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Whenengineersdesign

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WhenMarketersdesign

OfftheshelfApr.16,2016

Luxurycupnoodle30RMB

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Puttogether

•R&Ddepartmentisincharge•MKTdepartmentgetsinvolvedintheearlystageofnewproductdevelopment.

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4.2Whichcomesfirst?

ProductMarket

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Marketfirst:Uber

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Productfirst Failed

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Productfirst:Herbaltea

0

10000

20000

30000

40000

50000

60000ChinaHerbalTeaMarket(Million)

100millions50900millions

HerbalteabeatCoke

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Cost-benefitanalysis

•Marketfirst:•Benefit:Noneedtoworryaboutthedemandsize•Cost:Maymissthechancetoinventrevolutionaryproduct

•Productfirst:•Benefit:Pioneeringadvantage•Cost:Educatecustomers,greaterriskoffailure.

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NewmethodtosolvetheconflictCrowdfunding(众筹)

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Oneofyourbiggestlifeproduct:wedding

Anexhaustingwedding,especiallyaChineseone.

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Crowdfund yourwedding

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Crowdfund yourwedding

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4.3 Whenservicefails

Respondfast

Admitmistakes

Providesolutions

Longtermvision

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4.3.1 Respondfast

AlipayExplanationin30min,Servicerecoveryin90min.

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Respondlate

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Respondlate

Ctrip crashed?TryAlitripTryQunarTryTongcheng

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4.3.2 Admitmistakes

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Admitmistakes

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Unitedbreaksguitar:2008

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Unitedbreaksguitar:2008

•Within4weeksofthevideobeingpostedonline,UnitedAirlines'stockpricefell10%,costingstockholdersabout$180 millioninvalue.

•In2017,UnitedAirlinesstockdrops$1.4billionafterpassenger-removalcontroversy.

http://fortune.com/2017/04/11/united-airlines-stock-drop/

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4.3.3Providesolutions

•McDonald’sexpiredmeateventin2016.

NoBigMacsandChickenMcNuggets for3months

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4.3.4Longtermvision

•Servicefailurerecoveryiscostly,butit’sworthyinalongterm.

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iPad2’sreturn

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iPad2’sreturn

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After-class

•Read•Chapters12 & 13

•Heads-up:•Quiz2 onMay.10,10min,Chapters6-10.