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Using Sensory to Predict Potential Market Share Growth

InfoSense, Inc. April 19, 1999

Companies that can identify their core consumers are in a much stronger position to maintain these consumers. Likewise, the ability to target current non-consumers who are most likely to become core consumers will enable a company to efficiently focus advertising and marketing costs to obtain the greatest increase their market share. Many methods, both complex and simple, have been developed in the attempt to define just this information for companies. Discriminant analysis is such a method that is simple to use, can provide quality information, and can be performed easily and quickly using any standard statistical package.

The required data for discriminant analysis can be easily collected from a short (15-20 questions), well designed questionnaire structured to elicit information from consumers about acceptance and key product characteristics. Questions asked using 9-point importance or agreement scales should satisfy the necessary normality assumptions associated with discriminant analysis. Questions should cover as many aspects of the category to provide an understanding of consumer acceptance, expectations and usage of the product including, when appropriate, questions regarding quality, characteristics, price, availability, etc. Also required from the consumers completing the questionnaire the product that they typically use.

Discriminant Analysis classifies the consumers into the specified usage groups based on a discriminant function. For example it could be a function of how much consumers like a certain group of products. Consumers who use your product and are classified by the model as such are defined as the Core Consumers. Users of your product that are incorrectly classified by the model are defined as Vulnerable, while Non-Users classified as Users are defined as Prime Prospects. Non-Users that are correctly classified are defined as Non-Users.

Current market share estimates and the misclassification table from a discriminant analysis can then be used to estimate potential market growth (estimates based on the supposition that core consumers are retained and prime prospects can be converted to core consumers). Suppose the discriminant analysis focused on three brands (Brand A, Brand B, and Brand C). Further, suppose the discriminant function indicated that 80% of Brand A users were correctly classified and that 12% of Brand B users were incorrectly classified as Brand A users and 16% of Brand C users were incorrectly classified as Brand A users. In addition, it is known that Brand A has 25% of the current market share, Brand B 35% and Brand C 40%. From this we can estimate that Brand A has the potential to grow by 22%. (Brand A will retain 80% of its Core Consumers (20% market share), and potentially gain 12% of Brand B's market share (4.2%), and 16% of Brand C's market share (6.4%) for a potential market share of 30.6% - a 22% increase.)

By utilizing sensory information to identify Core Users and the Prime Prospects, you will be able to design a program to efficiently focus marketing strategies to obtain the highest percentage of growth to your core users group.