Assignment Task

One of the latest developments in the home entertainment industry is curved TVs. Though the market for curved TVs is a small portion of the overall TV market, it is growing at a healthy rate of 20% and has the potential to become the ‘next big thing’ in the TV industry. The product is still in the early stages of its lifecycle and Samsung and LG are the current dominant players in the market. Sony is planning to introduce its brand in the coming months and get a share of this promising market.

As a first step, Sony has conducted a conjoint analysis to identify the product profile which is most likely to succeed in the market. In a pre-test conducted among 100 participants, screen resolution, screen size and refresh rate were identified as the main attributes that consumers look for when buying a curved TV. Other attributes such as brand names (only leading brands have curved TVs) and price (curved TV consumers are less price sensitive) were found to be less important in this market. Sony’s engineering team can offer 3 different levels in each of these 3 important attributes as given below:

Assume that customers need not necessarily prefer higher levels of any of these attributes over a lower level (i.e. 2160 pixel TV is not necessarily better than 1080 pixel TV for a consumer because better attribute comes up with some other form of limitation such as higher weight, higher heat generation, etc.)

After identifying the attributes and their levels, Sony has collected the preference ranking of different product profiles using full factorial design among 20 participants (assume that they are representative of the population of Australia). It has also collected attribute information for 2 existing curved TVs in the market place, 1 from each of its competitors. The product profile information is given below and the preference data is given in the case Excel data file.

Sony’s objective in this conjoint analysis is to identify the product profile(s) which is/are likely to give the highest market share and profits. Sony is considering offering a maximum of 2 products based on one of the following strategies:

1. The most preferred product (i.e., the product with the highest market share)

2. Two products based on attribute preference segmentation 2 You have been hired as Sony’s marketing consultant to help analyse the conjoint data and identify the most profitable product strategy for Sony.

Task

1. Identify the product profile which is likely to get the highest market share using Multinomial Logit model (MNL).

2. By segmenting consumers on the basis of their attribute importance preferences, Sony has identified that the following 2 products are likely to best satisfy needs of consumers in different segments.

a. 2160 P, 55 In, 120 HZ

b. 2160 P, 65 In, 100 HZ

• If these two products are offered, how much market share can Sony acquire? (use MNL)

3. Sony has estimated that potential size of its market in Australia in the next year is 50,000 consumers and each consumer buys 1 unit on average. Sony gets a margin of $400 from each of its products. Sony will incur an additional fixed cost of $5 Million every year if it decides to offer two products instead of one. Under this scenario, evaluate the profit potential of the two product strategies.

4. Present your recommendations to Sony about which product strategy you would recommend to Sony and justify. (You may want to conduct further data analysis to support your recommendations.)

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