Marketing Decision Analysis Mini Case

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Marketing Decision Analysis
Mini-case 1

This mini-case is based on data from an everyday banking account preference conjoint study
conducted by a major bank in the US.
A large bank conducted a conjoint study in a mid-sized US city to find out how valuable
different service attributes of everyday transaction (checking) account were to its customers,
and to identify the account that best serves the needs of its consumers. The bank was
particularly interested in three key attributes – minimum balance required to waive monthly
service fee (MINBAL), monthly service fee (FEE) and the ability to withdraw cash from
other network ATMs, i.e. from ATMs of other banks (ON ATM). Each of these attributes can
take one of the three levels listed below.
MINBAL – The minimum balance required to waive a monthly service fee.
· $0
· $500
· $1000
FEE – Monthly service fee.
· $0
· $3
· $6
ON ATM – Availability and cost for using ATM networks of other banks.
· not available
· available and free
· available but costs $0.75 per transaction
A fractional factorial conjoint study was conducted in which respondents were asked to rank
the 9 checking account alternatives listed below (from most to least preferred).

Profile

Profile Description

1

Min. balance $0, monthly fee – $6, No ON ATM access

2

Min. balance $0, No monthly fee , Free ON ATM access

3

Min. balance $0, monthly fee – $3, $.75/transaction for ON ATM use

4

Min. balance $500, monthly fee – $3, Free ON ATM access

5

Min. balance $500, monthly fee – $6, $.75/transaction for ON ATM use

6

Min. balance $500, No monthly fee, No ON ATM access

7

Min. balance $1000, No monthly fee, $.75/transaction for ON ATM use

8

Min. balance $1000, monthly fee – $3, No ON ATM access

9

Min. balance $1000, monthly fee – $6, Free ON ATM access

Besides the ranks, the bank also collected the demographic and lifestyle characteristics of its
respondents, which allowed it to group all customers in to three major segments.
Segment 1 – Disengaged – customers who predominantly use basic banking services – mix of
less educated and elderly consumers, typically have lower incomes
Segment 2 – Traditional – customers who predominantly use regular services like everyday
transaction accounts and home loans – predominantly families with middle incomes
Segment 3 – Sophisticated – customers who use wide range of banking services,
predominantly college educated professionals, typically have higher incomes
You have been hired as the bank’s marketing consultant to help analyse the conjoint data and
identify the best product to offer. For a sample of 18 respondents, ranks and segment
membership are given in the mini-case data set. Note: Ranks are reverse coded (i.e. rank 1 is
shown as 9). Besides the ranks, segment sizes, average account balance of the three segments and the
estimated annual margin per $1000 account balance for each of the 9 product profiles are also given in
the data set. Your tasks are as follows.

1. Calculate the part-worths of each account attribute

2. Analyse and provide insights on the attribute preferences of the three segments
(Hint: Calculate the relative importance of different attributes, analyse differences
between the segments on the importance assigned to different attributes and discuss.
You can use the average importance assigned by each segment to each attribute for
this analysis)

3. Your client bank has two major competitors in the studied market (mid-sized city),
and they offer the following products.
Bank 1 – Prod 1 – Min. balance $500, monthly fee – $6, Free ON ATM access
Bank 2 – Prod 2 – Min. balance $1000, monthly fee – $3, $.75 per transaction for ON ATM
access

In this market, calculate the purchase probabilities for the nine product profiles using
Logit model.

4. Estimate the market share of each of the 9 profiles. Identify the profile that will yield
highest market share for the focal bank.
(Hint: Calculate the segment wise market shares (average purchase probabilities) of
each of the 9 profiles. Then calculate the overall market share by using segment sizes
as weights)

5. Estimated margin per $1000 account balance for each of the 9 profiles is given in the
data sheet. Estimated profits for a banking account can be calculated using the
following formula.

Estimated profit for a product = No. of. Customers * Market share of the product *
(Avg. balance of a customer in 1000’s) * Margin per $1000 for the product

The total customer base in the studied market is 100,000 customers. Calculate the
profits of each of the 9 profiles and identify the most profitable product.
(Hint: Calculate the segment wise profits and then add up the total profits across
segments. No. of customers in each segment can be obtained from segment size and
total customer base)

6. Recommend the best product for the bank. Explain your reasoning.