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Introduction to Snack Company

1. Suppose you are the market analyst of a snack company. Your company owns brand C in this category. You have been given a data set of 1,500 shoppers, which reports for each shopper his/her purchases of a set of brands over one year (data for question 1). Calculate the market share, penetration, purchase frequency. Fit the Dirichlet model to the data set and answer the following questions.

Evaluate your company’s brand performance in this category.

Define niche brands. Are there niche brands in this category? Discuss the limitations for being a niche brand.

Discuss the overall fit of the Dirichlet model to the data.

Discuss the managerial implications when looking to grow your brand in this category.

2. Suppose you are the market analyst of a soft drink company. Your soft drink brand manager has recently looked at the aggregate purchasing data in two periods and found that there is a decline in the sales to the heavy buyer group, from 307 units to 247 units (about 20% decline). She is concerned about this as she thinks that if sales to the heavy buyers keep falling, eventually total sales will also fall since, as she argues, the heavy buyers are those who contribute most to sales.

As the market analyst you know that there is always some natural variation from period to period in purchases. Apply the conditional trend analysis to the full data set (data for question 2). Present your findings to the brand manager. Advise her if her concerns are supported by your analysis. Discuss the managerial implications of your findings.

3. Suppose you are the market analyst of a wine company. Your research team has already conducted a Choice-Based-Conjoint study but needs you to do some analysis (data for question 3). Undertake a conjoint analysis, completing all the tasks below.

Calculate the partworths for well-known region, well-known brand and for a $10 increase in price. Convert the partworths to dollar values for a well-known region and a well-known brand. Interpret the results. Calculate the choice probabilities for all eight alternatives. Comment on the limitations of this method to estimate market shares.

In the current market, only five of the eight alternatives, alternatives 2, 3, 5, 7 and 8, are available. Re-estimate the market shares for these five alternatives. Your company is considering adding in to this market with one of the remaining alternatives (alternative 1, 4 or 6). Determine which alternative is the best for your company to add to the market by calculating the new market shares after the addition of each new alternative. Comment on the consumer tradeoff among well-known region, well-known brand, and low price. Comment on the impact of the new alternative on the existing market shares.

Present your answers as concisely as possible in the form of a Mini-Report (i.e. no need for an executive summary, introduction or conclusion, etc). The report should be written in 12-point font with 1.5 line spacing. The maximum length (including tables and appendices) is 10 pages OR 1,800 words, whichever is reached first. Front cover page and back reference page are not included within this limitation.

Introduction to Snack Company

Snack Company has been operating its business in selling C category snack products in the market.  It is analyzed that the fact that dirichlet distribution is determined as probability distribution on the sets of the non-negative numbers that is calculated by the sum to one good candidate determined for the model distribution.  The Snack Company has been selling 1772 products in markets which are 15% of the total products sold in the market. It is analyzed the brand performance of company is good as compared to the total industry turnover of the products and services. With the increasing ramified economic changes, every company needs to develop core competency in market which will strengthen their market share and also help company to compete with the rivals.  It is analyzed that company has covered 15% market share in selling the brand c category of the snack.

Computation of the total market size

11855

Computation of the market share

15%

Computation of the penetration rate

13%

Nonetheless, Brand C is performing way better if it is compared to the Brand D and Brand E products. It is analyzed that when the performance of the Brand C is compared with the Brand a Brand B then it is considered that Brand A has grabbed 42% market share in total industry turnover and Brand B has captured 28% market share. The market penetration is defined as how well company has been selling its brand C category consistently. It has kept 15% market penetration in the market which will increase the overall outcomes and business efficiency in determined approach (Berger, Matt, Steininger, and Hess, 2015). 

Niche brand could be defined as brand which is new in market and started to sell new products which have not been sold till now in market. Snack Company could grab the niche market by offering those products which are not offered in market till now.  There is no niche brand in this category which could be identified by the Snack Company to introduce its products (Berger, Matt, Steininger, and Hess, 2015).

Limitation of the niche

  • Niche Market is available only for the short term. If company enters into the niche market then due to its high profitability it has to face high competition form the new rivals.
  • It is analyzed that niche markets may be invaded by the large companies and small companies may find difficult to compete with them (Yang, Toubia, and de Jong, 2017).
  • Firm’s survival chances may also get decreased if it dependences solely on the niche market.

Dirichlet model

  • Dirichlet model undertakes the probability on the simplex set of the positive numbers and keeps negative numbers away for the calculation.
  • In the computation of the market share, penetration of the Snack Company, Dirichlet model would be the right choice as it makes ease for the cumbersome set of the data (Yin, Liu, and Liu, 2017).
  • With the advent of big data, there are many new potential applications for this model.
  • The Dirichlet model is helpful in determining how frequently-bought branded consumer products are purchased when the market is stationary and un-segmented.
  • It is analyzed that the Application of the Dirichlet model to the Brand C shows that it is segmented into the two different markets such as massive consumption one hand and a niche, in which consumers behave quite differently. The application of Dirichlet model could be used to show that even when the market is not steady or clustering occurs then the model mostly still holds to provide the useful benchmarks (Wright Sharp & Sharp 2012).

Managers need to strengthen the market position by following two main strategies such as product differentiation and cost leadership strategy.  It is required for the company to develop core competency in product differentiation and cost leadership strategy in market if they want company to compete with the strong rivals in all of its product life cycle stages. If in case, company has been facing issues in its business, then managers needs to identify the issues in the process and should implement the re-engineering of process to strengthen its overall outcomes towards the better satisfaction of the clients (Madsen, et al. 2014).

Computation of the Total Market Size and Market Share

Being a market manager of the soft drink company, I have found that sales of the soft drinks have been decreased throughout the time by 20%. The main reason of the fall in sales is related to introduction of the new types of the substitute’s products in market. Nonetheless, some parts of the sales have also decreased due to the natural variation from period to period in purchases (Raizada, and Rao, (2017).

Shopper class

1

2

3

4

5

6

7

Heavy buyers (bought 4+ units)

307

247

199

161

130

106

86

After implementing the proper trend analysis it is found that company will be facing the high downfall in its sales which will be approximately 20% yearly. It is analyzed that company needs to make the proper changes in its process functioning if it wants to sustain its business in long run. It could be done by following the proper life cycle stage strategy. It is considered that there are several other conditional factors which might impact the downfall in the sale of the goods. There are several conditional factors such as inflation rate, GDP rate of the country and purchasing power of the clients which might negatively and positively impact the business growth and outcomes (Nadtochy, et al. 2016).

After considering all the external and internal factors, it could be inferred that company might have increased in its sales after 3rd year sales. The inflation rate of the country has increased by 2.4% and GDP rate of the Australia has also increased by 2.5%. It shows that with the increasing purchasing power of the clients, it might positively impact the overall sales of the products and sales in market.

After implementing the trend analysis, it is found that company would have 2.4% increment in its heavy sales in the upcoming years due to the increasing inflation rate and purchasing power of the clients.  The deviation in the sales would be of 2.4% which is assumed on the basis of the increasing inflation rate and GDP rate of the Australian economy.

CONDITIONAL TREND ANALYSIS

Years

1

2

3

4

5

6

7

Heavy buyers (bought 4+ units)

307

247

253

259

265

272

278

This has shown that the sales of the heavy buyers will fall in the upcoming 3 years after that it will increase to 278 units’ sales. It is based on the 2.4% of the increasing rate assumed on the basis of the inflation rate and economic gross domestic rate. 

Predicted sales (It is based on the trend and external factors of business)

Years

Period 1

Period-2

Heavy buyers (bought 4+ units)

307

247

Therefore, it could be inferred after implementing the trend analysis that the sales to the heavy buyers is decreasing and even if it increases with the increase in the GDP and inflation rate it will still be lower than the sales made last year. The mangers of the company should focus on following the proper life cycle stage. This will allow company to introduce new products when the particular product reaches to its maturity stages (Berger, et al. 2015).

Brand Performance and Niche Dirichlet Model Limitations

It is analyzed that Conjoint is an analysis that provides a marketer with a method to predict how much more or less a consumer will one pack of the goods as compared with the comparison done for other. The likeness degree will be called utility of that attributes. In addition to this, Partworths is also defined as attribute the importance scores and level values which could be used as measured value which attributes and determine the level influenced on the client’s decisions making for the particular choice.

Calculate the Partworths for well-known region, well-known brand and for a $10 increase in price

Part-worth’s of the well-known product and well known region with the increase in $ 10

Selected number

Well known Region

Well Known Brand

Price

1

A

Wine

 $    10.00

2

A

Wine

 $    10.00

3

A

Wine

 $    10.00

4

A

Wine

 $    10.00

5

A

Wine

 $    10.00

6

A

Wine

 $    10.00

7

B

Wine

 $    10.00

8

B

Wine

 $    10.00

9

B

Wine

 $    10.00

10

B

Wine

 $    10.00

11

B

Wine

 $    10.00

12

B

Wine

 $    10.00

13

C

Wine

 $    10.00

14

C

Wine

 $    10.00

15

C

Wine

 $    10.00

16

C

Wine

 $    10.00

17

C

Wine

 $    10.00

18

C

Wine

 $    10.00

This is the probability of the combination which have been given marking on the basis of the collected data (Diaz–Rodriguez, Nguyen, Kim, and Sendova, 2017).

Choice of the

Alternative

Exponential of utility

Choice probability (%)

1

1

5

2

0.15

2

3

3.25

15

4

0.5

8

5

4.25

12

6

0.25

21

7

7.36

22

8

1.05

15

Total

17.81

100

The choice of probability is based on the exponential of utility. After that, it will be assumed that only some of the alternatives are available in market such as  1,4, and 7=6 . On the basis of the same market share will again be calculated.

Available Alternative

Total utility

Exponential of utility

1

0.00

1.00

5

-1.21

0.30

7

-0.78

0.46

The new market share will be determined when there will be only altenative availble in the market.

Alternative

Total utility

Exponential of utility

Choice probability (%)

1

0.00

1.00

57

4

-1.21

0.30

17

6

-0.78

0.46

26

Total

1.76

100

Alternative 5 would be added if the wines of the products are sold $ 10

Total utility

Exponential of utility

Choice probability (%)

5

1.27

3.55

67

1

0.00

Alternative

19

4

-1.21

0.30

5

6

-0.78

0.46

8

Total

5.31

100

 There will be three alternatives

Alternative

Choice probability (before launch)

Choice probability (after launch)

Change

3

0

57

57

1

57

24

-33

4

17

7

-10

6

26

11

-15

Total

100

100

Therefore, it could be analysed after assessing the above given table that, Alternative 5 (well known region, not well known brand, $10 price)  would be the best for the company to enter into the market as it has higher choice of the probability.

This equation has shown the partworths for well-known region, well-known brand and for a $10 increase in price and the same has also been converted into $

Regression Equation   Combination Preference = 5.91666666666667 + (1.51388888888889)*(Well known region) + (3.34722222222222)*(region) + (1.23148148148148)*(price) + (-2.31944444444445)*($100) + (-4.319444444)*($150) 

Estimation of the Market share for the five alternatives

  • Alternatives-1- 12%
  • Alternatives-2- 15%
  • Alternatives-3 11%
  • Alternatives-4- 10%
  • Alternatives-5- 20%

The Alternatives-5 is giving 20% market share for the company which will increase the overall outcomes and also strengthen the brand image of company.  

With the complexity of the data and issues related to regression analysis, company might face issue in determining the right market share. However, due to lack of right information it might mislead the data for the computation of the market share as the gathered data is the base for the calculation of market share through this method.

Comment on the consumer tradeoff among well-known region, well-known brand, and low price

Strategies for Developing Core Competencies in Market

It is analyzed that consumer will be more inclined towards the well-known brand if the price of their products goes down and Vice-Versa. The decrease in the price and well-known brand could be set up tradeoff between the sales of the products. In addition to this, in case of company with the decrease in the price and brand, Partworths for well-known region, well-known brand will be high and based on the $ 10 set for the combination of the wine products.  It will hamper their brand image and consumer’s choices towards the company.  There is need to set up Conjoint links features while setting up tradeoff between preference and perception Partworths for well-known region, well-known brand at the price of $ 10 shows that the demand for the wine in the particular blocks will be high only when they are customized as per the clients need and demand in market. This below image shows the requirement of the clients which might strengthen the overall outcomes and business efficiency in effective manner (Paramati, Roca, and Gupta, 2016). This computation has shown that these all factors are interlinked with each other’s and company while selling the particular brand needs to evaluate these factors before setting up the price in market (Lima et al. 2015).


Client’s needs => attribute level importance 

(Raizada, and Rao, 2017)

Adoption of new alternative and its impact

After analysing all the data and analyses given in the report, it could be evaluate that if the new alternatives is accepted then it will allow company to increase its overall sales. The main benefits of the new alternative would be related to reduce cost of capital and increased return on capital employed.

References

Berger, B., Matt, C., Steininger, D. M., and Hess, T. (2015). It is not just about competition with “free”: Differences between content formats in consumer preferences and willingness to pay. Journal of Management Information Systems, 32(3), 105-128.

Diaz–Rodriguez, O., Nguyen, T., Kim, H., and Sendova, T. (2017). Competing dynamics: Analyzing market share in a duopoly. Journal of Statistics and Management Systems, 20(5), 925-937.

Dotson, J. P., Howell, J. R., Brazell, J. D., Otter, T., Lenk, P. J., MacEachern, S., and Allenby, G. M. (2018). A Probit Model with Structured Covariance for Similarity Effects and Source of Volume Calculations. Journal of Marketing Research, 55(1), 35-47.

Lima Filho, T., Della Lucia, S. M., Lima, R. M., and Minim, V. P. R. (2015). Conjoint analysis as a tool to identify improvements in the packaging for irradiated strawberries. Food Research International, 72, 126-132.

Madsen, H., Lawrence, D., Lang, M., Martinkova, M., and Kjeldsen, T. R. (2014). Review of trend analysis and climate change projections of extreme precipitation and floods in Europe. Journal of Hydrology, 519, 3634-3650.

Nadtochy, Y. V., Klochko, E. N., Danilina, M. V., Gurieva, L. K., Bazhenov, R. I., and Bakharev, V. V. (2016). Economic factors and conditions for the transformation of the education services market in the context of globalization. International Review of Management and Marketing, 6(1S), 33-39.

Paramati, S. R., Roca, E., and Gupta, R. (2016). Economic integration and stock market dynamic linkages: evidence in the context of Australia and Asia. Applied Economics, 48(44), 4210-4226.

Raizada, G., and Rao, S. N. (2017). Conditional Probabilistic Analysis of Trade Ticks in Currency Derivatives Markets. The Journal of Trading, 12(2), 50-58.

Wright M, Sharp A & Sharp B (2012). Market statistics for the Dirichlet model: using the Juster scale to replace panel data. International Journal of Research in Marketing, 19, 81-90.

Yang, L., Toubia, O., and de Jong, M. G. (2017). Attention, Information Processing and Choice in Incentive-Aligned Choice Experiments. Journal of Marketing Research 11(2), 5-18.

Yin, K., Liu, Z., and Liu, P. (2017). Trend analysis of global stock market linkage based on a dynamic conditional correlation network. Journal of Business Economics and Management, 18(4), 779-800

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