In the marketing world introducing new products and services to the market is always a risky venture with success through forecasting systems rarely arriving at a 100% guarantee. According to Jerry W. Thomas, President of Decision Analyst Inc, Choice Modeling, “can reduce the risks associated with the introduction of new products by providing more accurate forecasts, especially for products without massive advertising support”.

Choice Modeling is now believed to be the most accurate and general-purpose tool currently available for making precise predictions about human decision making behaviour.

Despite the ambiguity surrounding Choice Modeling its no new thing, its origin tracing back to Thurstone’s research into food preferences in the 1920’s and random utility theory. Developed by economists and cognitive psychologists, its only over the last decade that the approach has gained credibility as a viable technique for forecasting sales of new products and services. This is in part due to American professor Daniel McFadden, (Ph.D) being awarded the Nobel Prize in economic decision making back in 2000 for his pioneering work in the application of Choice Modeling in economic decision making. Software advances and improvements in 3D-animation technology have also propelled the popularity of Choice Modeling.

So what’s the process?

Analytics teams can discern what consumers like and dislike and usually what they will purchase and discard; however to have the ability to decipher why a consumer chooses one particular brand over another is quite the rarity.

Multiple factors such as price, brand image, package colour, brand name, promotional offers and media advertising all play a role in a consumers purchasing decisions. Using controlled scientific experiments and advanced multivariate analyses, market researchers such as Jerry W. Thomas can now work with the aforementioned factors to “implicitly measure the marketing variables that underlie the consumers' purchase decisions."

"Discrete Choice Modeling, Volumetric Choice Modeling, and Conjoint Modeling are analytical methods used to simulate real-world consumer purchasing behaviour. Our Advanced Analytics consultants set up carefully controlled experiments in which consumers are simply asked to choose how many of each product they would buy, given predetermined sets of realistic conditions. Consumers are not consciously aware of what is being measured. The brands are presented visually (including 3D simulation), if possible, in the context of advertising, pricing, packaging, features, promotion, and other variables. The importance of each marketing variable is then derived mathematically”.


So how does it help me?

Choice modeling techniques can help marketing researchers:

Analyze price sensitivity
Bundle product and service features
Optimize brand strategy
Improve product-line planning
Maximize media advertising effectiveness
Improve promotional offers
Optimize advertising messages
Improve package designs


Choice Modeling & OnQue

Onque brings you the best of the best when it comes to Choice Modeling implementation with the unique bespoke methods used by our new addition to the family, Dr. Con Menictas. As a Marketing Scientist using advanced statistical methods, Con’s focus is on developing unique brand equity, predictive consumer choice models and dynamic market segmentation solutions both for academia and the market research industry.

Choice Modeling and Environmental Economics

It’s not just in retail that Choice Modeling is making a mark; it has also become a fundamental component of environmental valuation within environmental economics. Previously contingent valuation methods (ranking tasks) were used to decipher people’s willingness to pay (WTP) for environmental quality change, now economists are changing tact, believing offering potential consumers choice as opposed to rank proves more beneficial.

The Commonwealth Scientific and Industrial Research Organisation (CSIRO) are now utilizing Choice experiments in the economic maintenance of Australia’s rivers and wetlands.

Interested in your company benefiting from Choice Modeling?

Contact OnQue at our floating office.