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Which market size should I use for profit optimization?

Dear Sawtooth Software Team,

I have conducted a CBC on female clothing rental offers in Germany. My sample is representative for the German female population aged 20-59 years.
Throughout the survey I have also asked for the general respondent's willingness to use clothing rental offers / services.

Now I want to perform a profit optimization in the market simulator.
I am wondering if I should use the entire German female population as market size (using the CBC data of the total sample) or only the share of the population, which might be interested in clothing rental according to the survey (using the CBC data of the sample segment, interested in clothing rental)?

How do you usually proceed?

Thank you so much!

Best regards,
asked Mar 7, 2020 by Mel (250 points)

1 Answer

0 votes

I've done it both ways.  Make sure to match your sample to your population (i.e. if you want to restrict predictions to those who said they might be interested, then project to that number using only those people in your simulator).  

Now, if your respondents answered very well, you might hope that those who said they weren't interested also have very large utilities for none so that if you would include them in the simulator you might project to similar market size numbers as if you took them out and projected to the smaller universe size.  Depending on how the none alternative was worded (and whether you had one and how respondents used it) this match between the projections might be better or worse.

I usually run it both ways, to see if they're different, and if they're different, I go with the one I trust more.  On at least one occasion where I was torn between the projections, I simulated both ways and then used the average for my forecast.
answered Mar 9, 2020 by Keith Chrzan Platinum Sawtooth Software, Inc. (103,225 points)