MARKETING

DECISION
MAKING
Decision Making
CAC
This document covers the basic concepts of Marketing
Decision Making

CONTENTS
1. Go-To-Market Strategies
2. Marketing Research
a. MDS and Semantic Analysis (Perceptual Maps)
b. Conjoint Analysis
3. Sales Force Sizing
4. Resource Allocation
5. Forecasting Product Category Demand (Bass Model)
6. Estimating Maximum Willingness to Pay

Go-To-Market Strategies
A Go-to-Market Strategy involves designing& managing an efficient& effective portfolio of
"go-to-market" participants that connect a firm with its customers to create sales.
Activities: Customer Attraction& Retention Activities: Interest creation Pre-purchase Purchase
Post-purchase; Other channel functions: Processing ownership, breaking bulk, Delivery, Credit& finance.

Participants: Sales Force Options: Direct Sales Force Agents / Distributors / Retailers/ValueAdded Partners. Non Sales Force: Advertising &/Promotion/Direct Mail/Tele-channels/Internet.

Steps in the Process:

Marketing Research
Uses of marketing research:
Diagnostic analysis: Nature of the market? What is our current performance?
Opportunity analysis: Opportunities for growth?
Two Key Questions: What attributes does the consumer use in comparing competing
products& how do these characteristics relate to the technical features [Perceptions]. What is
the relative weight assigned to each attribute when deciding which product to buy [Preference]

MDS and Semantic Analysis (Perceptual Maps)

Uses of Perceptual Maps:
1. Customer Analysis and Competitive Analysis
1. Understand the competitive market structure as perceived by customers.
a. Position relative to competition
b. Select the set of competitors to compete against
2. Represent customers perceptions in a manner that aids
communication and discussion within the organization
2. Product
1. Perceptions of a new product concept in the context of existing brands in the market
2. Finding the gap in the market to position the product
Semantic Analysis
REMEMBER: Semantic Scaling always asks questions about the perceived products
along a number of dimensions.

MDS Analysis:
REMEMBER: MDS always asks questions about SIMILARITIES and DISSIMILARITIES
between TWO Products on various attributes

Conjoint Analysis
1. Steps in Conjoint:
a. Attribute list formation
b. Data collection
c. Utility Calculation
d. Market Simulation
Conjoint (trade-off) analysis has become one of the most widely-used quantitative methods
in Marketing Research. It is used to measure the perceived values of specific product
features, to learn how demand for a particular product or service is related to price, and to
forecast what the likely acceptance of a product would be if brought to market.
In contrast to simpler survey research methods that directly ask respondents what they
prefer or the important of each attribute, these preferences are derived from these relatively
realistic tradeoff situations.
Each profile includes multiple conjoined product features (hence, conjoint analysis), such as:

There are different ways to show product profiles.

Respondents usually complete between 12 to 30 conjoint questions. The questions are

designed carefully, using experimental design principles of independence and balance of
the features. By independently varying the features that are shown to the respondents and
observing the responses to the product profiles, the analyst can statistically deduce what
product features are most desired and which attributes have the most impact on choice.

The result is usually a full set of preference scores (often called part-worth utilities) for each
attribute level included in the study. (This is obtained by running a regression)
Summing up the part-worth utilities gives the utility of the particular profile.
Mathematical Representation Example:

Summary Steps of Conjoint Analysis Application:

2. Applying the choice Model (converting utility scores for product alternatives to probabilities of choice):

a. Maximum utility rule (deterministic)

Pick the Product with the maximum utility score
b. Logit Model (Probabilistic)

3. Mind Share Indications:

Pros and Cons of Conjoint Analysis:

Pros:
1. Results are easy to interpret& key attributes are easily established. 2. Attributes can be
categorical as well as intervally scaled.
Cons: 1. Relevant attributes& key levels must be known in advance 2. Approach gets messy
with many attributes& levels 3. Market share estimates obtained differ from actual shares.
Some Real World Applications of Conjoint:

Sizing the Sales Force

Four-Step Market-Based Process:
1. Customer Understanding: a) Identification b) Needs c) Buying processes
2. Customer Segmentation.
3. Segment Coverage& Assessment of segment value for the firm.
4. Sales Force Sizing.
Approaches to Sales Force Sizing:
1. Financial approaches:
a) Percentage of sales b) Affordability
2. Workload buildup approaches:
Develop the most appropriate workload for each market segment; Add up the effort
required to cover each of the market segments; SFS=SE/SEapp

3. Sales response approach:

Adbudg:
Used to measure market response to advertising& sales force
Uses judgments-structured survey among managers to harvest the collective
wisdom about market responsiveness
Uses soft data to quantify market responses i.e puts equation to intuition
Upside very useful in scenarios with no data quickbuilds consensusencourages systematic thinking;

Implementation:
What do you expect the sales level (relative to current levels) to be in response to
no sales force
50% of current sales force
100% of current sales force
150% of current sales force
saturation level sales force
Answering these questions is usually done by forcing a consensus estimate from a team of managers all
members of the team first answer the questions privately results are revealed& discussed adjustments
are made& discussed until a single set of answers to the 5 questions remains.

After the calculations are made, Sales Response is calculated as:

c

Sales response = min + (max min) SF / (d + SF ) ; d = Competition Parameter, c = shape parameter.

Resource Allocation
Market Share Identity:
Market Share = Awareness x (Intention/Awareness) x (Market Share /

Intention) = (product quality) x Advt -1 x Prt x Sft

where are the advertising, price& sales force elasticities.

From Elasticities to Allocation:

Allocating resources across multiple products within an SBU:

1. Without interdependent demand:

2. With interdependent demand :

Interdependent demand Examples: Gillette
Sensor and Gillette Sensor Prestige
Detergents (Tide and Cheers) by P&G

American Express Green, Gold and Platinum cards

Empirical Generalizations on Elasticities:

Allocating Resources across Segments

BCG Matrix Approach:
Classify Product/Business Groups on two dimensions:
market/industry attractiveness [how good is the
market] company/business strength [how strong am I]

Business strength is measured as Relative Market Share

The larger I am, the greater is the likelihood that I can generate cash
Industry Attractiveness is measured as % age growth rate of the market
Growing industries are more attractive
Growing industries require cash

Assumptions:
All managers of various divisions share the same corporate goal
All managers agree that opportunities vary at any point in time and over time
There is sufficient information about ajor competitors and market structur