Perceptor Model

Glen L. Urban

Introduction Motive

Develop model for designing and positioning of new frequently purchased consumer products.

Model structure Trial and repeat process that produces an estimate of long- run share

for a new brand. Main idea

Model the distance from the ideal brand to brand trial and repeat purchase estimates for a new product in an existing market.

Outputs Understanding of perceptions, preference and purchase process

underlying product positioning decision. Tool for estimating the market share for alternate new brand designs.

Model Structure

Long Run Market Share Model: m = ts …………. (1)

m= long run market share, t= fraction of the target market that ever tries the

new brand (0 ≤ t ≤1) s= share of purchases of new brand among those

who have ever tried the brand (0 ≤ s ≤1) Now, Urban further developed this ‘t’ or the

ultimate trial fraction on the basis of the Trial Model

Model Structure (Contd.)

Ultimate Trial Model: t = qwv ………..... (2)

q = ultimate probability of trial given awareness and availability

w = long run awareness of the new brand v = long run availability of the new brand (volume

weighted percentage of stores carrying the brand) The market share of those who have used

the brand is modeled as the equilibrium of a two- state Markov process

Model Structure (Contd.)

Steady- state Share Process: S = P21/ (1+ P21 – P11) ……….. (3)

for those who have tried the new brand Pij = Probability of purchase of brand j at next purchase

opportunity when brand i was purchased last, 0 ≤Pij≤ 1.0, i or j = 1 refers to new brand, i or j = 2 refers to all other brands.

This Markov formulation assumes that the frequency of purchase of the new brand is the same as existing brands.

Model Structure (Contd.) Perception and Preference Mapping

Xby = ∑Aα=1fyarba …………………… (4)

xby, = coordinates of brand b on dimension y for the perceptual map of those who have not tried our brand, but who are aware of concept (b = 1, 2, . . . B, where B = new brand; y = 1,2,. . .Y)

fya = factor score coefficient for dimension y and attribute scale a (a = 1,2,. . . A)

rba = standardized average rating of brand b on scale a.

Iy = coordinates of average ideal point of dimension y for map of those who have not tried our brand but are aware of the concept. This Iy would be used subsequently

Model Structure (Contd.)

Probability of Purchase (Trial) q= α0 + α1dB

2 ……………… (5) q = as defined in (2) dB

2 = squared distance from ideal point to the new brand on map for those who are aware but have not yet used the new brand

α0 , α1 = coefficients to be determined empirically

Model Structure (Contd.)

In case of a perceptual space having z dimensions where the new brand occupies the position Xz and ideal position is Iz, then: dB

2 = ∑zz=1hz(Xz-Iz)2 …………….. (6)

Hz = importance weights for dimension z

Model Structure (Contd.)

Probability of Repeat P11 = β 0 + β1d2

B …………… (7) pll = probability of repeat purchase if new brand was

purchased last. (0 ≤p11 ≤ 1.0) d2

B = distance squared from ideal point to new brand after use perceptual map for those who have used the brand)

β0 , β 1 = coefficients to be determined empirically

The probability of repeat purchase if the new product is not chosen (p21)is empirically determined.

Model Structure (Contd.)

Sources of New Brand Share After substituting the trial (5) and repeat (7)

probabilities in (2) and (3) an estimate of the share of the new brand is obtained by (1).

It is assumed that share will come from the brands that are perceptually most similar to the new brand (i.e. nearest to it on the map) and from the brands that are most widely evoked.

A brand is defined as evoked by a consumer if it has been used, if it would be considered at the next purchase, or if it is rejected as a purchase alternative.

Model Structure (Contd.)

Sources of New Brand Share (contd.) Kb = m [(eb/D2

bB) / ∑B=1B-1(eb/D2

bB)] ………….. (8) kb = loss in market share of existing brand b m = market share of new brand eb = fraction of people who have brand b in their

evoked set D2

bB = distance squared from brand b to new brand B in users map

This completes the model description.

Thank You

Sunny BoseIIMT