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Real world performance of choice-based conjoint models


Natter, Martin; Feurstein, Markus (2002). Real world performance of choice-based conjoint models. European Journal of Operational Research, 137(2):448-458.

Abstract

Conjoint analysis is one of the most important tools to support product development, pricing and positioning decisions in management practice. For this purpose, various models have been developed. It is widely accepted that models that take consumer heterogeneity into account, outperform aggregate models in terms of hold-out tasks. The aim of our study is to investigate empirically whether predictions of choice-based conjoint models which incorporate heterogeneity can successfully be generalized to a whole market. To date no studies exist that examine the real world performance of choice-based conjoint models by use of aggregate scanner panel data. Our analysis is based on four commercial choice-based conjoint pricing studies including a total of 43 stock keeping units (SKU) and the corresponding weekly scanning data for approximately two years. An aggregate model serves as a benchmark for the performance of two models that take heterogeneity into account, hierarchical Bayes (HB) and latent class (LC). Our empirical analysis demonstrates that, in contrast to the performance using hold-out tasks, the real world performance of HB and LC is similar to the performance of the aggregate model. Our results indicate that heterogeneity cannot be generalized to a whole market and suggest that aggregate models are sufficient to predict market shares (MSs).

Abstract

Conjoint analysis is one of the most important tools to support product development, pricing and positioning decisions in management practice. For this purpose, various models have been developed. It is widely accepted that models that take consumer heterogeneity into account, outperform aggregate models in terms of hold-out tasks. The aim of our study is to investigate empirically whether predictions of choice-based conjoint models which incorporate heterogeneity can successfully be generalized to a whole market. To date no studies exist that examine the real world performance of choice-based conjoint models by use of aggregate scanner panel data. Our analysis is based on four commercial choice-based conjoint pricing studies including a total of 43 stock keeping units (SKU) and the corresponding weekly scanning data for approximately two years. An aggregate model serves as a benchmark for the performance of two models that take heterogeneity into account, hierarchical Bayes (HB) and latent class (LC). Our empirical analysis demonstrates that, in contrast to the performance using hold-out tasks, the real world performance of HB and LC is similar to the performance of the aggregate model. Our results indicate that heterogeneity cannot be generalized to a whole market and suggest that aggregate models are sufficient to predict market shares (MSs).

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27 citations in Web of Science®
29 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2002
Deposited On:09 Dec 2016 10:39
Last Modified:09 Dec 2016 10:39
Publisher:Elsevier
ISSN:0377-2217
Publisher DOI:https://doi.org/10.1016/S0377-2217(01)00147-3
Other Identification Number:merlin-id:14209

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