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The Market Simulator is like a "voting machine" where respondents consider multiple product alternatives (a market scenario) and "vote" for which ones they prefer.  The votes for the different product alternatives are percentages that sum to 100% that we call "shares of preference."  Of course, we don’t contact respondents again to ask them to look at the market scenario and vote; we use their conjoint utilities to predict what they would do.


The Market Simulator (Choice Simulator) is usually considered the most important tool from a conjoint project. The simulator turns conjoint utilities into something much more managerially useful: simulated market choices. Products can be introduced within a simulated market scenario and the simulator reports the percent of respondents projected to choose each (or to choose None, if the None option was included in your questionnaire). A market simulator lets an analyst or manager conduct what-if games to investigate issues such as new product design, product positioning, and pricing strategy.


A Warning about Interpreting the Output of Market Simulators


Under very controlled conditions (such as mature markets with equal information and distribution), market simulators often report results that closely match long-range equilibrium market shares. However, conjoint analysis cannot account for many real-world factors that shape market shares, such as differences involving length of time on the market, distribution, out-of-stock conditions, advertising, effectiveness of sales force, and awareness. Conjoint analysis predictions also assume that all relevant attributes that influence share have been measured. Therefore, the share of preference predictions usually should not be interpreted as market shares, but as relative indications of preference.


Base Case Scenario


Typically, 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 (versus the None alternative), reflecting a likely configuration.


The Market Simulator lets you define various products to include in the simulation. You select either the level text or (for continuous attributes like Price) the numeric value associated with different levels. Each product is defined using one and only one level of each attribute.


Along with 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. See Market Simulation Methods.


After you have chosen the appropriate simulation technique (the default is Randomized First Choice), you can begin conducting simulations.  Typically, one first examines the shares of preference (or choice) given to the products in the base case.  Then, you can investigate modifications to the base case 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.



See Market Simulators for Conjoint Analysis for more information on market simulators.        

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