Base Case Scenario

Introduction

Market simulations (choice simulations) provide a very useful way to use conjoint/choice data.  Simulations provide an intuitive tool to move from the esoteric realm of part-worth estimates/effects toward the practical world of predicting buyer behavior for specific market situations.  Before using the choice simulator, you should become familiar with some terminology, issues and theory.

This section will discuss setting up a base case scenario, the scaling of simulation results, the Red-Bus/Blue-Bus problem, and the five simulation models offered in the Market Simulator.  

Base Case Scenario

Usually the first step in using the market simulator is to define a "Base Case" scenario.  A base case typically reflects a current (or future) market scenario: your brand vs. the relevant competition.  If there is no relevant competition, or your conjoint study was designed to model only your product, the base case may be a single product, reflecting a likely configuration.

The Market Simulator lets you input the market scenario in a grid format, where the products are rows and the attributes are columns.

You provide text labels in the first column to identify the products.  In the attribute cells, you select either the level text or the numeric value associated with different attributes.  You don't even need to memorize your attribute list since you can just double-click the cell to select from the list of brand, package, or color levels that were included in your study.  For example, Product B is defined by Brand B, level 1 of Package and a Green color.  

After defining the market scenario, you should decide which simulation method is appropriate for your data and the types of strategic questions you intend to answer.  Later, we'll describe all five available models in the Sawtooth Software market simulator and provide some notes and recommendations for each.

After you have chosen the appropriate simulation technique, you can begin conducting simulations.  Typically, one first examines the shares of preference (or choice) given to the products in the base case.  Then, modifications to the base case are investigated by altering the base case itself and rerunning the analysis, or by adding additional "scenarios."  A scenario is just another name for a defined set of competitive products, and setting up each subsequent scenario feels just like defining the first base case scenario.  The market simulator lets you input many simulation scenarios, and stores these for your convenience.

Prior to introducing the different models of choice offered by the Market Simulator, it is instructive to cover two topics: the Exponent and the Red-Bus/Blue-Bus problem.