Stated choice discrete choice modeling examine the market

response of a new product introduction. Forecats market

acceptance.
Very practical use of the qualitative response models on a
marketing situation. Very useful to marketing. Forecasting
consumer behavior.
Multinomial Logit Model
1. Consumers form final choice sets
MNL model derived from random utility model. Thurstones
Law of comparative Judgment
Theory of discrete choice a set of individual behavior rules and
an indirect utility function contains a random element
Random element: existence of important unobservable
influences (heterogeneity) similar to error term of OLS
Random Utility models choices among two or more alternatives.
o Consists of a true utility value: mean value + random error
Respondents are utility maximizers
<EQUATION> The probability of choosing alternative I in some
choice set of A, equal to the probability that the mean value I
plus its randome error is larger than the mean values and errors
of other j alternatives.
The importance of brand equity
o Introducing new products under same brand
Modeling consumer purchase decisions for brand extensions,
determine if firms with greater brand equity can achieve market
share thoruhg product extension.
Thoery of branding is limited.
Brand Equity perceptual, attitudinal and heavioral asset
associated with the brand. Gives competitive advantage.
Brand name improves product brand extension
This study predicts the likely number of patrons in the market
who will be motivated to try a new product introduced by a quick
service resto
Objective: examine potential demand for a new product among
competition and determine the relative importance of brand
equity
Low fat burger vs vegetarian burgers vs salad bar
Demand for new products and influence of brand equity
H1: Positively Accepted
H2: Leverage itself
H3: Optimal positioning strategy will differ
Methodology

o Conducted to only one small segment wrong. Should be

random sample. Only applies to generation Y. Should not
be considered representative. Although the paper already
says it, it needs to apply it to a random sample set to have
any significance.
o Questions: Past quick service resto experiences,
preferences and satisfaction,
o Placed in a lunch selection game (not dinner and etc)
When presented with competing product offerings, consumer will
choose product that maximizes satisfaction. Hence discrete
choice models
A lot of selectivity bias. Better turn it into tobit with censored
regression (censor the older ones so that you dont get bias) or
use multinomial logit but representing everyone.
8 randomly generated and one fixed choice tasks

GAMMA function: probability of choosing alternative i from choice set A

ratiooftheexponentialutilityofi,relativetothesumofall
theexponentialutilitiesinsetA
Model representing both direct brand effects and indirect
marketing mix effects
Fixed choice task hold out task to test predictive validity of
multinomial logit models. If accurate, should predict the
selections in the fixed hold out task
Brand equity should influence consumer choice, so utility effect
in a multinomial logit model serves as an affective proxy of brand
equity. Quantifies the effect of a given brand on consumer choice
behavior
RESULTS
Using MLE to model data
Brand: Highest Utility Harveys. Lowest Dairy Queen
Price As price increases, utility decreases
Burger Type Highest Utility for a single patty low fat burger
(healthier alternatives)
Vegetarian: Utility is highest for meat patties, vegetarian that
tastes like real meat has higher utility than vegetarian
Service: 2-3 minutes serving time > immediately served. Utlity
decreases as waiting time increases.
Salad Bar: As price of salad bar increases, utility decreases.
Absence of a salad bar contributes negatie
Predictive Validity of Multinomial Logit
8 random generated, and one fixed choice task

FIXED: hold out task to test predictive validity of multinomial

logit models
FIXED TASK COUNT: A&W was picked by 34.22% of respondents.
MCDO 36.17%. Harveys 29.61%
Main Effects: using the utilities derived from the model.
o Overall utility effects as represented by the non-stochastic
utility component (Equation 5)
Two way: Main effects + additional brand specific components
(Equation 7) = Actual Performance
Results
Reject H1, market favors real meat over vegetarian
Base case scenario
Base case scenario upon which future product changes can be
compared against.
Each alternative will have identical products

Burger King brand equity leader

Mcdo Market share leader