GYAAN KOSH

TERM 2
Learning and
Development Council,
CAC

Marketing Decision Making

This document covers the basic concepts of Marketing
Decision Making covered in Term 2. The document only
summarizes the main concepts and is not intended to be an
instructive material on the subject.

Gyaan Kosh Term 2

MKDM

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

Learning & Development Council, CAC

Gyaan Kosh Term 2

MKDM

Learning & Development Council, CAC

Go-To-Market Strategies
A Go-to-Market Strategy involves designing& managing an efficient& effective portfolio of "go-tomarket" participants that connect a firm with its customers to create sales.
Activities: Customer Attraction& Retention Activities: Interest creation Pre-purchase Purchase Postpurchase; Other channel functions: Processing ownership, breaking bulk, Delivery, Credit& finance.
Participants: Sales Force Options: Direct Sales Force Agents / Distributors / Retailers/Value-Added Partners.
Non Sales Force: Advertising &/Promotion/Direct Mail/Tele-channels/Internet.

Steps in the Process:

Gyaan Kosh Term 2

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Learning & Development Council, CAC

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.

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Learning & Development Council, CAC

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

Gyaan Kosh Term 2

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Learning & Development Council, CAC

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.

Gyaan Kosh Term 2

MKDM

Learning & Development Council, CAC

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)

Gyaan Kosh Term 2

MKDM

Learning & Development Council, CAC

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:

Gyaan Kosh Term 2

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Learning & Development Council, CAC

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;

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Learning & Development Council, CAC

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

Gyaan Kosh Term 2

MKDM

Learning & Development Council, CAC

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

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Learning & Development Council, CAC

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 structure

Gyaan Kosh Term 2

MKDM

Learning & Development Council, CAC

Strengths
easy to use
diverse applications
Resource allocation Effect of mergers on strategy
Weaknesses
- Questions about share profitability link
Assumptions about finite cash flow
Subject to Moral Hazard
Often misapplied as they appear to be easy to use
Assumes independence across SBUs.
GE Mckinsey Matrix:
Two Dimensions Industry Attractiveness Business Strength Specify drivers of each dimension Identify
factors that are important Weight drivers Assign relative importance weights drivers Score each driver
for the SBU Multiply the weight with the score for each SBU View& interpret the graph Perform
sensitivity Analysis Size of circle is the Market Size Size of the pie represents the Market Share of the SBU

Gyaan Kosh Term 2

MKDM

Learning & Development Council, CAC

Forecasting Product Category Demand (Bass Model)

Introduction:
The Bass model as it has come to be known is undoubtedly one of the most widely used, frequently
referenced and thoroughly researched marketing models in the world. First published in 1969, the model
has withstood the test of time and technician who have added numerous bells and whistles designed to
extend it, expand it, add more variables and more complexity. Yet the basic three parameter model
continues to deliver accurate useful forecasts and insights for executive decision about innovations that are
opening new and emerging markets.
What is so unique about the model? It is amazingly versatile. It can represent distinctly different patterns of
adoption from slow growth sleepers to instant hits blockbuster for distinctly different products from
state of the art consumer electronics to such common tools as the toaster and the hair dryer. And, distinctly
different fields from medical breakthroughs like artificial insemination and rural innovations as bale hay.
It is a predictive model that allows us to forecast future adoptions, even when no data exists for our
innovation. We can use the parameters from the data base of products that had similar characteristics
when they were adopted.
The Model:
The model is built on two basic assumptions, that potential adopters of an innovation are influenced by two
types of communication channels. Broadcast media and interpersonal channels. Individuals adopting a new
product because of what they see or hear from mass media advertising messages occur continually, but
peak early in the product life cycle. And individual adopting based on what they see or hear from prior
adopters.
If M is the upper bound on sales, the Demand from Innovators in time period t is:
D1 = p[M-At]
(2.1)
Where, p is the coeff of innovation and At is the number of adopters by time t
The Demand from Adopters is:

D2 =
[  ][ ]
(2.2)
Thus the total demand is,
St = D1 + D2

(2.3)

Where, At = St-1 + St-2

(2.4)

Gyaan Kosh Term 2

Graphical Representation of New Adopters:

MKDM

Learning & Development Council, CAC

Gyaan Kosh Term 2

MKDM

Learning & Development Council, CAC

Estimating Maximum Willingness to Pay

Steps:
1. Calculate the Exchange Rate
2. Using the Regression Data, find the Sum of all Utility From Non-Price Attributes
3. Multiply the Exchange Rate with the sum calculated in step 2 to obtain the Maximum WTP.
Example:

Let us say we now have 2 products with the following attributes:

Gyaan Kosh Term 2

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Learning & Development Council, CAC

2. Sum of Non Price Attributes can be calculated as below:

3. We get the Maximum WTP by multiplying Exchange Rate in Column 1 with the sum in Column 8.