Discriminant Analysis, Marketing Segmentation & Perceptual Maps

Perceptual Map Created With Discriminate Analysis

Perceptual maps are used to visualize the differences and similarities in perceptions and choices between products, brands or customers.

For example, a manufacturer of salon brand hair care items wants to see whether a lifestyle variables such as being a NASCAR racing fan, education level, ethnicity and demographic variables such as personal income, sex and a number of other factors are useful in distinguishing purchasers of their products from purchasers of other salon hair care brands.   Based on this classification, customer profiles will be developed in order to plan targeted advertising campaigns.

Discriminate analysis, a multivariate technique used for market segmentation and predicting group membership is often used for this type of problem because of its ability to classify individuals or experimental units into two or more uniquely defined populations.  The discriminant score is the basis for predicting to which group (a purchaser of the manufacturer’s brand or a competitive brand) the particular individual belongs. The discriminant weights of each predictive variable (age, sex, income, etc) indicate the relative importance of each variable.  For instance, if age has a low discriminant weight then it is less important than the other variables.

With this information, a classification matrix can be developed that indicates the accuracy of our model that will be used to construct our map.  For instance, if our discriminant model correctly classified 94.5-percent of users of our brand, then only 5.5-percent were incorrectly classified.  Conversely, if the model correctly classifies 92-percent of the competitive brand users, then only 8-percent were incorrectly classified.  We consider this a strong model because the number of correct classifications is much higher than what might be expected by chance.

Other Applications of Discrimant Analysis

While our example illustrated how discriminant analysis helped classify users and nonusers of salon brand hair care products based on independent variables, other uses of discriminant analysis include the following:

Product research – Distinguish between heavy, medium, and light users of a product in terms of their consumption habits and lifestyles

Perception/Image research – Distinguish between customers who exhibit favorable perceptions of a store or company and those who do not

Advertising research – Identify how market segments differ in media consumption habits

Direct marketing – Identify the characteristics of consumers who will respond to a direct marketing campaign and those who will not

Conclusion

While discriminant analysis is often used in marketing research for marketing segmentation and predicting group membership, there are more powerful and accurate techniques available.  We invite you to learn more about our solutions by contacting us today.

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Ensure The Success Of Your New Product With Conjoint Analysis

Using Conjoint To Develop Successful New Products

Conjoint analysis is a term given to a broad set of marketing research techniques that are used in new product development.  Some of the main types of conjoint analysis include Choice Based Conjoint (CBC), MaxDiff, and Adaptive Conjoint Analysis (ACA).  Because each offers special advantages, THE MARKETING ANALYSTS offers all major types to address the specific requirements of your project.

How Can Conjoint Analysis Help Me?

When the correct conjoint method is used, it is extremely effective determining the optimal set of features that a new product should have and the best pricing strategy.  Conjoint analysis works by simulating an actual purchase experience and explains how people make choices between products and services.  The result is a dynamic market model that determines the best product design and pricing strategy that optimizes profitability, market share and how the behavior of competitors will influence your market position.

How Conjoint Analysis Works

While the conjoint analysis has been used for many years, new varieties continue to be developed that provide more powerful and accurate results.  In a typical study, respondents are asked to make a series of product feature relates trade-offs or choices.  The simple exercise usually asks respondents to select or rank the most preferred alternatives from a selection of competing alternatives.  The analytical analysis is usually carried out using hierarchical Bayesian mathematics.  Because of the flexibility of new conjoint methods, research studies can be conducted by web or paper-and-pencil surveys.

Conjoint analysis can be used to determine what really drives customers to buy one product over another and what customers really value, when the following assumptions are met:

1. A product (good or service) must be able to be described or represented by a set of attributes that are mutually exclusive.
2. Consumers view the product as a combination of attributes that can be exchanged for others.  An example is the inclusion of an additional product feature in exchange for a higher price.
3. The total utility (value) of the product being analyzed is equivalent to the sum of the individual utilities of each attribute.  It is important to realize that several common forms of “conjoint analysis” do not consider nonlinear relationships, particularly interactions among attributes.  Ignoring interaction will lead to bad research results.
4. Products with a greater overall utility are more attractive than products with lower total utility scores.

When these assumptions are met, conjoint analysis provides quantifiable and actionable data that include:

• Relative importance for each product attribute
• Most desirable level of each product attribute
• Potential market share for the product
• Market segmentation information

For additional information about conjoint analysis, please visit  and contact us today about our low prices.

Using Marketing Research To Develop Successful Product Lines

Marketing Research For Product Line Management

Most organizations market more than one product.  For example, Unilever, a giant consumer products manufacturer, may offer one of its shampoos in a variety of scents.  From a marketing perspective, a company’s product line is the group of products that are closely related.  For instance, products may be similar in a broad sense because of product class.  Proctor & Gamble has a food products line, a paper products line and a cleaning products line.  Products within a line may perform a particular function such as laundry care.  A product line could also be identified by price points and by distribution channel strategies.  For example, the Kenmore brand of appliances is only available through Sears.

Strategic Product Line Management

When developing a new product line or evaluating an existing product line, there are several factors to consider.  For example, what variables should be used to distinguish one product from another?  Many companies find it useful to distinguish between lines using a good-better-best approach.  For example, Lennox Industries, a manufacturer of heating and cooling equipment (HVAC) has a builder grade line (entry level $), a standard line (good $$) and their Signature line (best $$$).  As another example, Dr. Pepper offers a diet line of soft drinks and a regular line of soft drinks.

Because a company may offer several classifications of products and define its various product lines in many ways, there is a real need for a term that encompasses all offerings from an organization.  That term is the product mix. For instance, Samsung manufactures and sells televisions, mobile phones, monitors, Blu-ray players, cameras, heavy equipment, ships and more.   The term width of product mix is used to identify the extent of product lines associated with a company’s firm regardless of how diverse or narrow it might be.

Product Line Decisions & SKU Reduction

In many companies, marketing departments have launched too many new products that offer little differentiation and provide no incremental profit.   In addition to development and marketing costs, the cost to warehouse, distribute and continue to promote these items can be equally expensive and inefficient.    You can easily understand the challenges facing product managers when you factor in additional challenges that include retail space limitations, slotting fees, stock-outs and gaining visibility.  As a result, there is a tremendous need for better decision-making relating to new product development, sku rationalization and sku reduction.

Strategic Product Line Planning

To solve the problem, THE MARKETING ANALYSTS offers proactive marketing research techniques to determine if the amount of differentiation of a new SKU offers incremental value.  This type of research provides extremely valuable results when planning a SKU based on new flavors, colors, scents, sizes, etc.).  Our marketing research techniques provide answers to questions like “What is the best set of product combinations (SKU’s) that will maximize profitability?”, “What is the most efficient combination of SKUs to offer that maximizes the differences between SKU’s and avoids perceived similarity?” and “What should the priority be when offering new SKU’s?”  Most importantly, our approach provides manufacturers with the answers they need before investing in product development and marketing launch strategies.

Think Marketing Research Is Too Expensive? Think Again!

In a world where perception is everything, businesses often think that professional Marketing Research is too expensive.  Now, who can argue with perception, let alone Marketing budgets, most of them on shaky ground these days?   In today’s economy, a business could easily argue against expensive luxury services like Marketing Research.  Still, as I hear from business leaders about their woes in this time of fiscal crisis, my reaction is “expensive compared with what?”

The Marketing Analysts offers a broad line of inexpensive marketing services that have traditionally been too costly for small, medium, and medium-large companies.  Just like some of the world’s largest Marketing firms, we offer the same services that create, evaluate and strengthen brands.  However, unlike other marketing firms, our predictive marketing research methodologies are superior and produce more reliable results.  Further, we can offer prices that even small businesses can afford because we can capitalize on advanced technological and proprietary marketing software technologies that our competitors lack.

The Marketing Analysts is a Marketing firm with offices in Dallas, Texas; Fort Myers, Florida; Sofia, Bulgaria; Cologne, Germany; Ismailia, Egypt and Moscow, Russia to provide one-stop, high quality, low cost solutions for your special marketing needs.

Our Marketing Research competencies include measuring attitudes and behaviors to explain accurately and predict market share, revenue, and bottom line impact of a client’s actions.  Our team of consultants has been successfully designing, executing and analyzing Marketing Research studies since 1996. We help our clients launch better products and services, attract and retain valuable customers, and build stronger brands. Whether you are looking for advice on how to optimize the development and launch of a new product, seeking guidance on how to build brand wealth and customer loyalty, or in search of a customized product line solution, we provide growth solutions.

In addition, to providing predictive marketing services, we also offer a variety of integrated marketing solutions including content management systems, search engine optimization, and language translation services.

Our team is highly talented and consists of respected Marketing Ph. D’s, experienced Marketing Managers, talented Computer Science professionals and competent Language Translators who hold advanced degrees from respected universities known around the world.

With our highly skilled associates, we are able to leverage all activities effectively to affordably meet each of our client’s unique objectives.  Please visit our web site THE MARKETING ANALYSTS today for additional information.