Identifying Unmet Demand

Abstract

Brand preferences and marketplace demand are a reflection of the importance of underlying needs of consumers and the efficacy of product attributes for delivering value. Dog owners, for example, may look to dog foods to provide specific benefits for their pets (e.g., shiny coats) that may not be available from current offerings. An analysis of consumer wants for these consumers would reveal weak demand for product attributes due to low efficacy, despite the presence of strong latent interest. The challenge in identifying such unmet demand is in distinguishing it from other reasons for weak preference, such as general non-interest in the category and heterogeneous tastes. We propose a model for separating out these effects within the context of conjoint analysis, and demonstrate its value with data from a national survey of toothpaste preferences. Implications for product development and re-formulation are explored.

Keywords: Heterogeneous variable selection, conjoint analysis, Bayesian hierarchical model

JEL Classification: C11, C25, M31