The encyclopedia · R&D & Science · Marketing decision · 1988–1990
ABB Electric used choice models to take customers from the incumbent
ABB Electric mapped customer preferences with choice models in a collapsing market and became the industry's dominant firm.
ABB Electric, Inc.
the move
ABB Electric was in its third year and approaching break-even when total industry sales of electrical equipment fell by half; to survive it had to take customers from established major competitors.
It built a new marketing information system using multiattribute disaggregate choice modeling, which identified customers' current perceptions of ABB versus competitors and what attributes they most wanted from the products.
ABB used that to design strategies for taking customers and segments from competitors, to reorganize as the low-cost producer, and to select new products with long-term cost advantages; it survived, grew and became the dominant firm in the industry.
why it works
- A market that halves forces a challenger to take share, not ride growth.
- Size and history do not say which segment a new firm can win.
- Choice models reveal the attributes that decide the purchase and where ABB could win.
- Measured: ABB survived and became the dominant firm in the industry.
what transfers
In a shrinking market a challenger wins by finding the attributes a specific segment wants most and that it can serve cheaply; model preference, then pick products and segments on that.
what came after
ABB Electric became the dominant firm in its industry and the standard example of a choice-modeling market information system, winning the 1989 Franz Edelman Award; the models' predictive accuracy let it continue selecting profitable products and segments.
references
- A Choice-Modeling Market Information System That Enabled ABB Electric to Expand Its Market Share
- A Choice-Modeling Market Information System That Enabled ABB Electric to Expand Its Market Share
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