toy horse conjoint analysis

Toy Horse Conjoint Analysis Leonardo Zhang

Executive Summary Key Points and Recommendations: u Through bene8it segmentation we found 3 consumer segments and the product No. 15, No. 13 and No. 2 are best target to each segment.

u  Through priori segment level conjoint analysis we con8irmed and quanti8ied age/

gender differences in styling preferences. No. 12 meets the overall group’s needs, gender differences are more signi8icant than age.

u Through simulate market shares and pro8its for different product-‐line scenarios we suggest EarlyRiders modify existing No. 13 product to No. 15, drop No. 5 product and add No. 2 product.

Taken competitor’s reaction into consideration. A new product with No. 15 and No. 2 products will generate the highest pro8it ($158,333, 82.58% increase compared with statue quo $86,657). By then the market share of EarlyRiders will increase from 36.4% to 65%. u Combined two segmentation analyses together we found No. 15 is very suitable for targeting girls and 1~2 year-‐old group, and product No. 2 is more preferred by boys and 3~4 year-‐old group. We recommend EarlyRiders tailor packing images, locations for ads and promotion events accordingly.

1: BeneJit Segmentation via Cluster Analysis of Conjoint Part-‐Utilities Test cluster approaches and select the best – 3 clusters u Approach 1: “toclust” function (result: 3 clusters) toclust = partworths; pm1 = pamk(toclust,scaling=TRUE) pm1$nc u Approach 2: use sum of squares plot (result: 3 clusters) Test 2, 3 and 4 clusters 3 clusters 8its best

Segmentation output

u Segment size

Constant Price Height Motion Style

u Segment center data

u Segment description and targeted product segment 1: Prefer: Price=119.99, Height=26’, Motion=rocking, Style=glamorous. (“height” is the most important attribute) Product that best targets this segment: Product ID 15 $139.99+26’+rocking+glamorous (Meet all their preferences except price, not very price sensitive) segment 2: Prefer: P=119.99, H=18’, M=rocking, S=glamorous. (“price” and “motion” are the most important attributes, style is the least in8luential attribute) Product that best targets this segment: Product ID 13 $139.99+18’+rocking+glamorous (Meet all their preferences except price, not very price sensitive) segment 3: Prefer: P=119.99, H=26’, M=bouncing, S=racing. (“price” is the most important attribute, “height” is the least in8luential attribute) Product that best targets this segment: Product ID 2 $119.99+18’+bouncing+racing (Meet all their preferences except height, since they are very price sensitive we set a lower price. Consider our cost and the less in8luential of height, we will give them 18’)

segment segment segment

2: Priori segment level conjoint analysis Overall regression result without segment

"price" is the most in8luential attribute "style" attribute is the least important In average, moving from 0 to 1 on "price", "height” and "style" attributes increase utility, on "motion" decrease utility overall preferred feature: “price”=119.99, “height”=26', “motion”=bouncing, “style”=glamorous (Product ID 12)

Price Height Motion Style

Segment by age

Only "height" and "motion” have signi8icant difference. Means 1~2 year-‐old age group has different part-‐worth in H and M attributes compared to overall group. 1~2 year-‐old group is more prefer “height”=26 and “motion”=bouncing. 3~4 year-‐old group is less sensitive with “height”.

Overall 1～2 year-‐old

3~4 year-‐old

Segment by gender

All attributes are signi8icant. Means female group has different part-‐worth in all attributes compared to overall group. Female group more prefer "height"=26, "motion"=rocking and "style"=glamorous, and less sensitive in “price”. Male group is more price sensitive, and prefer "motion"=bouncing and "style"=racing.

Overall Female

Male

EarlyRider's product ID

Competitor's product ID

EarlyRider's market share

Competitor's market share

EarlyRider's pro8it ($)

Competitor's pro8it ($)

13&5 7 0.364 0.636 86,657 180,950

Status Quo

Scenario 1: Add No. 15 & No. 2 Because No. 13, No. 15 & No. 2 best target 3 segments we analyzed before. EarlyRider's product ID






13&5&15&2 7 0.979 0.021 223,148 13,364

Scenario 2: Add No. 15 & No. 2, Drop No. 5 Because No. 5 is less appealing, when provided with No. 13 & No. 7 at the same time, all 3 segments will not select No. 5. EarlyRider's product ID






13&15&2 7 0.977 0.023 240,708 -‐12,732

Scenario 2’: Consider competitor lower price However, in Scenario 2, the competitor will try to decrease price and win back market share and pro8it, so our actual pro8it will be $142,733. EarlyRider's product ID






13&15&2 8 0.662 0.338 142,733 54,346

3: Simulate market shares & proJits for different product-‐line scenarios

Scenario 3 and Scenario 4: Choose between 15 and 13

15&2 7 0.973 0.027 256,725 -‐11,469 15&2 8 0.65 0.35 158,222 56,986 13&2 7 0.758 0.242 193,609 56,462 13&2 8 0.462 0.538 99,637 98,338







After take a deeper look at the products combination in Scenario 2, we 8ind that 15 and 13 are similar and may cause cannibalization. Thus, we test the scenarios of only producing 1 product of those two. Still in both scenarios, competitor will lower price for it’s own interest.

As a result, When producing 15 & 2 and competitor products 8, EarlyRider will yield a pro8it of $158,222, which is higher than that when producing 13 & 2.

Scenario 5: Treat the market as a whole? If we treat the market as a whole, the most favorable for all people is product 12 ($119.99, 26”, Rocking, Glamour), so we test the scenario of only produce product 5. Also competitor in this scenario will lower his price.







12 7 0.928 0.072 228,666 2,749 12 8 0.596 0.404 139,704 68,863

To conclude, EarlyRide should develop a product line with produce No. 15 & No. 2

No.15: $139.99, 26”, Rocking, glamorous No. 2: $119.99, 18”, Bouncing, Racing

According priori segment level conjoint analysis by gender in Part 2, No. 15 is very suitable for targeting girls. And product No. 2 is more preferred by boys. Also since 1~2 year-‐old group is more height sensitive, No. 15 product is more suitable for it and No. 2 product is more suitable for 3~4 year-‐old group.

Implications for the company's marketing plans


Female Less price sensitive 26’ Rocking Glamorous

No. 15 $139.99 26’ Rocking Glamorous


Male More price sensitive Less height sensitive Bouncing Racing

No. 2 $119.99 18’ Bouncing Racing

4: Concrete Recommendations to EarlyRiders

Use different marketing approaches for No. 15 and No. 2 to better targeting different groups. Avoid cannibalization and gain each consumer segments’ market shares as more as possible. For No. 15 product: u Targeting to girls and 1~2 year-‐old group u Design feminine packing images and product appearance u Tailor product design better meet 1~2 year-‐old group’s 8igure u Choose toddler zone in toy stores/ TV shows and cartoons targeting girls for ads u Promotion event idea: different customs for toy house as gift u Emphasize product functions in marketing For No. 2 product: u Targeting to boys and 3~4 year-‐old group u Design masculine packing images and product appearance u Tailor product design better meet 3~4 year-‐old group’s 8igure u Choose 3~4 year-‐old kids zone in toy stores/ TV shows and cartoons targeting boys for ads

u Promotion event idea: toy horse racing competition, collaborate with kindergartens u Emphasize low price and boy preferred features in marketing

Appendix

Plot (2 clusters) Plot (4 clusters)

Not chosen segmentation output

GenderD AgeD

1 female 1~2 year-‐old

0 male 3~4 year-‐old

Values of dummy variables used in regressions

Product ID Price Height Motion Style 1 0 0 0 0 2 1 0 0 0 3 0 1 0 0 4 1 1 0 0 5 0 0 1 0 6 1 0 1 0 7 0 1 1 0 8 1 1 1 0 9 0 0 0 1 10 1 0 0 1 11 0 1 0 1 12 1 1 0 1 13 0 0 1 1 14 1 0 1 1 15 0 1 1 1 16 1 1 1 1

Price 1 = 119.99 0=139.99 Height 1=26" 0=18" Motion 1=Rocking 0=Bouncing

Styles 1=Glamorous 0=Racing

Scenario 2 utility simulation

No. 13 Product

No. 5 Product

No. 7 Product

Segment 1 61 50 66 Segment 2 47 46 39 Segment 3 13 19 24

Simulation Code

toy horse conjoint analysis

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