Chicago New York London Dubai New Delhi Bangalore SingaporeSan Francisco
www.absolutdata.com
© Absolutdata 2014 Proprietar...
2© Absolutdata 2014 Proprietary and Confidential
About Absolutdata
Market
Analytics
Customer
Analytics
Market
Research
Dat...
3© Absolutdata 2014 Proprietary and Confidential
A Short Tale of Intelligent Analytics
Introducing the protagonist of this...
4© Absolutdata 2014 Proprietary and Confidential
The Problem of Plummeting Revenue
One day Mr. Target gets a frantic call ...
5© Absolutdata 2014 Proprietary and Confidential
Strategy to Increase Revenue
Mr. Target identifies a two-pronged strategy...
6© Absolutdata 2014 Proprietary and Confidential
Revamping the Menu – Means to an End
He knows that revamping the menu is ...
7© Absolutdata 2014 Proprietary and Confidential
Search for the Right Approach – Does CBC Answer the Questions?
 Mr. Targ...
8© Absolutdata 2014 Proprietary and Confidential
Mr. Target’s Eureka Moment – Menu Based Conjoint
 MBC is a choice modeli...
9© Absolutdata 2014 Proprietary and Confidential
Root of all Hassles – Underperforming Menu
This shows the current menu av...
10© Absolutdata 2014 Proprietary and Confidential
Point of Arrival – Hypotheses to Test
Note: Respondents are shown severa...
11© Absolutdata 2014 Proprietary and Confidential
Please Make your Selection (1 of 3)
Change in Price of Drink
Note: This ...
12© Absolutdata 2014 Proprietary and Confidential
Please Make your Selection (2 of 3)
Addition of Tacos & Change in Price ...
13© Absolutdata 2014 Proprietary and Confidential
Please Make your Selection (3 of 3)
Change in Price of Pizza Combo, Pizz...
14© Absolutdata 2014 Proprietary and Confidential
Insights (1 of 4): Right Combos at the Right Prices
MBC helps identify t...
15© Absolutdata 2014 Proprietary and Confidential
Insights (2 of 4): Profitable Complements with Combo
MBC helps identify ...
16© Absolutdata 2014 Proprietary and Confidential
Insights (3 of 4): Optimal Price for Sides & Beverages
MBC also helps un...
17© Absolutdata 2014 Proprietary and Confidential
Insights (4 of 4): New Product – A Substitute or Complement?
MBC helps u...
18© Absolutdata 2014 Proprietary and Confidential
Mr. Target hits the Jackpot – The New and Improved Menu
MBC helped Mr. T...
19© Absolutdata 2014 Proprietary and Confidential
Mr. Target wins the Market
9%
5% 4%
Ticket Size Guest Count1 2
Increase ...
20© Absolutdata 2014 Proprietary and Confidential
Industry Application of Menu Based Conjoint
Industry
Applications
of MBC...
21© Absolutdata 2014 Proprietary and Confidential
Conclusion – A Short Summary
MBC gives more power to consumers by allowi...
22© Absolutdata 2014 Proprietary and Confidential
For more information visit www.absolutdata.com
For queries, please write...
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Application of MBC through Storytelling in CPG Industry

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MBC gives more power to consumers by allowing consumers to select one to multiple options from a menu to indicate their preference. It is most useful in in markets where customers have freedom to customize an existing product or build their own package.

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Application of MBC through Storytelling in CPG Industry

  1. 1. Chicago New York London Dubai New Delhi Bangalore SingaporeSan Francisco www.absolutdata.com © Absolutdata 2014 Proprietary and Confidential April 30, 2014 Application of MBC in CPG Industry through Storytelling
  2. 2. 2© Absolutdata 2014 Proprietary and Confidential About Absolutdata Market Analytics Customer Analytics Market Research Data Visualization & Reporting Big Data Strategy & Services Company Overview  Founded in 2001  We are decision engineers and apply decision sciences every day to improve decisions at the world’s largest companies  Senior management from McKinsey, Kraft, Pfizer, Mitsubishi, Nielsen, GE, HSBC and Citigroup  Headquartered in San Francisco and delivery centre in Gurgaon, India with regional offices in London, Singapore and Dubai  Significant Investment in capability building – Deepening existing competencies and diversifying into new areas  Continued focus on thought leadership – at international conferences, NASSCOM paper on Marketing Analytics Corporate Philosophy Mission To empower forward-looking organizations reach new heights of business performance through the optimal use of data Services Provided
  3. 3. 3© Absolutdata 2014 Proprietary and Confidential A Short Tale of Intelligent Analytics Introducing the protagonist of this tale Mr. Target who is Product Manager for a leading fast-food restaurant THE FAST-FOOD RESTAURANT His job is to decide the different items of the menu As a consistent performer in his company, he is the go-to guy for all business related issues Product Manager Mr. Target
  4. 4. 4© Absolutdata 2014 Proprietary and Confidential The Problem of Plummeting Revenue One day Mr. Target gets a frantic call from his Senior Manager Mr. Hassled.. ..who is completely hassled by the falling revenue shares
  5. 5. 5© Absolutdata 2014 Proprietary and Confidential Strategy to Increase Revenue Mr. Target identifies a two-pronged strategy to increase the restaurant’s revenues Ticket Size Increasing per ticket sale for existing customers Guest Count Incremental volume from new customers
  6. 6. 6© Absolutdata 2014 Proprietary and Confidential Revamping the Menu – Means to an End He knows that revamping the menu is the key and narrows down to the following business questions  Based on demand and revenue, what are the right combos and optimal price for each?  Which menu items are profitable complements with the combo offerings at what price?  What should be the optimal price for the individual items being sold? Optimal Menu & Pricing New Product – Substitute or Complement  Would the introduction of “Tacos” cause any cannibalization? ? 
  7. 7. 7© Absolutdata 2014 Proprietary and Confidential Search for the Right Approach – Does CBC Answer the Questions?  Mr. Target’s instinctive solution to this problem is Choice Based Conjoint (CBC)  But he soon realizes that CBC is not the best approach to this problem. This is because in a CBC exercise, respondents make a single choice among pre-designed available options and they cannot build their preferred choice  What Mr. Target needs is an approach that mimics the actual purchase process of a customer who visits his restaurant and creates his order! ?  With the business questions in place, all Mr. Target needs is the right research approach
  8. 8. 8© Absolutdata 2014 Proprietary and Confidential Mr. Target’s Eureka Moment – Menu Based Conjoint  MBC is a choice modeling method used for products and services that allow buyers to choose from one to many items (or bundles) on each menu where each item has a price associated to it  MBC is the perfect solution to Mr. Target’s problem as it would: – Compare preferences for different combos and a la carte menu items offered in the fixed menu at different prices – Optimize the product offerings for maximizing revenue and uptake – Anticipate the sales and profits ?  Mr. Target suddenly remembers his notes from a conference where they spoke about Menu Based Conjoint (MBC)
  9. 9. 9© Absolutdata 2014 Proprietary and Confidential Root of all Hassles – Underperforming Menu This shows the current menu available at the fast food chain COMBO MEALS Classic Combo $3.00 Cheese Burger Combo $3.50 Pizza Combo $4.00 SIGNATURE MAINS Basic Burger $2.00 Cheese Burger $2.50 Pizza $3.5 SIDES & BEVERAGES Fries $1.50 Drink $1.00
  10. 10. 10© Absolutdata 2014 Proprietary and Confidential Point of Arrival – Hypotheses to Test Note: Respondents are shown several scenarios with variations in products and price. The selections in the scenarios is indicative of their preference. Mr. Target carefully puts down certain hypotheses he plans to test using Menu Based Conjoint SIGNATURE MAINS Basic Burger $2.00 Cheese Burger $2.50 Pizza $3.5 COMBO MEALS Classic Combo $3.00 Cheese Burger Combo $3.50 Pizza Combo $4.00 SIDES & BEVERAGES Fries $1.50 Drink $1.00 Signature Mains  Change prices of individual items to identify optimal price  Introduction of “Tacos” Combo Meals  Change prices for different bundles to maximize revenue and uptake Sides & Beverages  Change prices of Sides and Beverages to identify profitable complements with the combo offerings
  11. 11. 11© Absolutdata 2014 Proprietary and Confidential Please Make your Selection (1 of 3) Change in Price of Drink Note: This is only for illustrative purpose Classic combo selected with a la carte as pizza, fries & drink on the screen shown Hey!! I think I’ll buy an extra drink along with the Pizza. Respondent COMBO MEALS Classic Combo $3.00 Cheese Burger Combo $3.50 Pizza Combo $4.00 SIGNATURE MAINS Basic Burger $2.00 Cheese Burger $2.50 Pizza $3.5 SIDES & BEVERAGES Fries $1.50 Drink $1.00 P PP P
  12. 12. 12© Absolutdata 2014 Proprietary and Confidential Please Make your Selection (2 of 3) Addition of Tacos & Change in Price of Classic Combo, Basic Burger, Cheese Burger Note: This is only for illustrative purpose With change in menu items and introduction of tacos, classic combo selected with tacos, fries & drink but NOT pizza COMBO MEALS Classic Combo $3.00 Cheese Burger Combo $3.50 Pizza Combo $4.00 Tacos Combo $4.00 SIGNATURE MAINS Basic Burger $2.00 Cheese Burger $2.50 Pizza $3.5 Tacos $2.0 SIDES & BEVERAGES Fries $1.50 Drink $1.00 P P PP Respondent Oh!! they now have Tacos and its cheaper than the Pizza. So, I’m going to go with that for now
  13. 13. 13© Absolutdata 2014 Proprietary and Confidential Please Make your Selection (3 of 3) Change in Price of Pizza Combo, Pizza and Fries Note: This is only for illustrative purpose With Pizza at a lower price and classic combo at an increased price, both these items selected along with fries & drink COMBO MEALS Classic Combo $3.00 Cheese Burger Combo $3.50 Pizza Combo $4.00 Tacos Combo $4.00 SIGNATURE MAINS Basic Burger $2.00 Cheese Burger $2.50 Pizza $3.5 Tacos $2.0 SIDES & BEVERAGES Fries $1.50 Drink $1.00 P P P P P The Tacos are more expensive and the Pizza is cheaper. Hmm.. I think I will buy Pizza instead. Respondent
  14. 14. 14© Absolutdata 2014 Proprietary and Confidential Insights (1 of 4): Right Combos at the Right Prices MBC helps identify the most preferred combo at the right price by allowing to compare performances of combos at different prices Classic Combo is the most preferred combo amongst the combos offered Optimized Price for Classic Combo is $3.25 -20% -10% 0% 10% 20% 30% $2.5 $2.75 $3 $3.25 $3.5 $4 Price Curve for Classic Combo Revenue Transaction 0% 20% 40% 60% 80% 100% Classic… Cheese Burger… Pizza… Preference Curve for Combos PreferenceShares Base price%agechangeoverBaseCase
  15. 15. 15© Absolutdata 2014 Proprietary and Confidential Insights (2 of 4): Profitable Complements with Combo MBC helps identify the most profitable complement at the optimal price which can be offered with the combo People purchase pizza with Classic combo and its removal would lead to decrease in combo off takes Optimized Price for Pizza is $3.00 -20% -10% 0% 10% 20% 30% $2.75 $3.0 $3.25 $3.5 $3.75 $4.0 Price Curve for Pizza Revenue Transaction Base price $3.0 is the optimal price point for Pizza since a decline from $3.5 to $3 shows a significant increase (~8%) in the number of customers as well as the total revenue over current menu
  16. 16. 16© Absolutdata 2014 Proprietary and Confidential Insights (3 of 4): Optimal Price for Sides & Beverages MBC also helps understand the profitable sides & beverages at their optimal price points Price of fries can be increased to $1.75 from $1.5 as it would only lead to a drop of 3% in purchase Price of fries can be increased to $1.75 from $1.5 as it would only lead to a drop of 3% in purchase 0% 10% 20% 30% $1.0 $1.5 $2 $2.5 $3 $3.5 Price Curve for Drink 0% 10% 20% 30% $1.0 $1.25 $1.5 $1.75 $2 $2.5 Price Curve for Fries DemandDemand
  17. 17. 17© Absolutdata 2014 Proprietary and Confidential Insights (4 of 4): New Product – A Substitute or Complement? MBC helps understand the cannibalization of a la carte items when prices are changed or new items added to the menu Pizza & Tacos are purchased by different consumer segments and do not cannibalize each other Optimized Price for Taco Launch $2.00 0% 10% 20% 30% $1.5 $1.75 $2 $2.5 $3 $3.5 Price Curve for Tacos Demand After $2 there is sudden decrease in the demand for Tacos and hence $2 is the optimal price point to introduce Tacos for maximum off take
  18. 18. 18© Absolutdata 2014 Proprietary and Confidential Mr. Target hits the Jackpot – The New and Improved Menu MBC helped Mr. Target to decide his new and improved optimized menu to increase his company’s revenue shares COMBO MEALS Classic Combo $3.00 Cheese Burger Combo $3.50 Pizza Combo $4.00 SIGNATURE MAINS Basic Burger $1.50 Cheese Burger $1.50 Pizza $3.0 Tacos $2.0 SIDES & BEVERAGES Fries $1.75 Drink $1.50 Note: Addition of Tacos at $2; Classic Combo, Fries & Drink price increased; Pizza price decreased
  19. 19. 19© Absolutdata 2014 Proprietary and Confidential Mr. Target wins the Market 9% 5% 4% Ticket Size Guest Count1 2 Increase in total revenue The results yielded a 9% revenue growth from both existing and new consumers
  20. 20. 20© Absolutdata 2014 Proprietary and Confidential Industry Application of Menu Based Conjoint Industry Applications of MBC Software as a Service (SaaS) Different packages with certain features Automobile Industry ‘Build Your Own’ Car Pharma – Drug Therapy Combination of drugs for prescription Financial Sector Multiple services that can be add-ons Shared Resources & Outsourcing IT Bundling services from different vendors
  21. 21. 21© Absolutdata 2014 Proprietary and Confidential Conclusion – A Short Summary MBC gives more power to consumers by allowing consumers to select one to multiple options from a menu to indicate their preference. It is most useful in in markets where customers have freedom to customize an existing product or build their own package. It can help answer the following business questions:  Understanding trade-offs between pre-configured bundles versus single features (à la carte options)  Identify the right bundle of products to offer  Price the bundle and individual products optimally  Identify substitutes vs. compliments from the menu  Does reducing the price for an item cause a different item on the menu to be chosen more likely (or even less likely)?  Enables to maximize configurations for revenue and uptake
  22. 22. 22© Absolutdata 2014 Proprietary and Confidential For more information visit www.absolutdata.com For queries, please write to info@absolutdata.com
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