Balancing Features And Profit
A packaged goods company wanted to take advantage of the strong equity of its brand by adding a ‘close-in’ line extension. Initial research identified a nutritional focus as the most promising product opportunity. However, the cost of the nutritional ingredients skyrocketed after the initial research.
Marketing wanted to determine the relative importance of the different nutritional and health benefits (Vitamins, Grains, Fat Content, Calories, etc.) and determine if levels of the ingredients could be scaled back without impacting product interest and price/value perceptions.
Due to the large number of attributes and levels under consideration, we developed an adaptive choice-based conjoint (ACBC) design to identify which ingredients could be eliminated or scaled back without eroding purchase interest and the optimal price.
We were able to identify the relative importance of the product attributes and reductions that could minimize the negative impact of the reduced levels of the desired ingredients.
In order to understand the relative profitability, the fixed cost and cost of ingredients at the various levels were integrated into a model along with the data from the conjoint study. This model allowed us to simulate the base case and to identify the most profitable scenarios. And, our interactive model allowed the client to run unlimited scenarios in real time.