Bayesian Design and Analysis Delivers Profits and Market Share Gains
Feb 27, 2017 12:47 PM
Bayesian Design and Analysis Delivers Profitable Market Share Gains
A major appliance repair provider sought to profitably increase market share by introducing the most competitive product they could consistently execute. The challenge was to assess from the vast spectrum of servicing feature combinations, just those that mattered most to the buying decisions - and to do so in just one study. When rendered, the experiment varied 43,200 choices with characteristics such as; service guarantee, service warranty, servicing urgency, and service price. Further, the study was fielded assuring specific subject variable considerations were given to differing customer populations and appliances needing repair.
Getting the service right. A utility neutral pilot study was first fielded to their employee population. Parameter estimates from the pilot study were then used to create locally-optimized nonlinear design. This choice experiment was then fielded in subsequent waves to both customer and prospect populations. Further, because preference characteristics were believed to vary by appliance, the survey was fielded such that respondents evaluated only choices based on specific appliance breakdowns they had experienced within the previous year.
Targeting the right service. A Hierarchical Bayes choice analysis was used to fit parameter estimates for each individual respondent surveyed. By modeling respondent-level parameter vectors, the company was able to identify prospective customers based on specific demographic, geographic, and psychographic profiles that showed who was most receptive to the new repair service offering.
Bringing home the service profit. The long-held belief that there was untapped revenue potential in the home repair business proved true. By using willingness to pay estimates, the study isolated the potential by monetizing high-utility service characteristics commanding maximum pricing. Premium service offers were then validated in a series of field tests revealing the market’s preference for the high-priced premium servicing offerings. At scale, when extrapolated to current and potential customers,
the profit contribution of the premium service offering take rate is astonishing.