A fuzzy set preference model for market share analysis

Consumer preference models are widely used in new product design, marketing management, pricing, and market segmentation. The success of new products depends on accurate market share prediction and design decisions based on consumer preferences. The vague linguistic nature of consumer preferences and product attributes, combined with the substantial differences between individuals, creates a formidable challenge to marketing models. The most widely used methodology is conjoint analysis. Conjoint models, as currently implemented, represent linguistic preferences as ratio or interval-scaled numbers, use only numeric product attributes, and require aggregation of individuals for estimation purposes. It is not surprising that these models are costly to implement, are inflexible, and have a predictive validity that is not substantially better than chance. This affects the accuracy of market share estimates. A fuzzy set preference model can easily represent linguistic variables either in consumer preferences or product attributes with minimal measurement requirements (ordinal scales), while still estimating overall preferences suitable for market share prediction. This approach results in flexible individual-level conjoint models which can provide more accurate market share estimates from a smaller number of more meaningful consumer ratings. Fuzzy sets can be incorporated within existing preference model structures, such as a linear combination, using the techniques developed for conjoint analysis and market share estimation. The purpose of this article is to develop and fully test a fuzzy set preference model which can represent linguistic variables in individual-level models implemented in parallel with existing conjoint models. The potential improvements in market share prediction and predictive validity can substantially improve management decisions about what to make (product design), for whom to make it (market segmentation), and how much to make (market share prediction).