Node Description

Scale Distributions Node

The Scale Distributions node is designed to take Product-level WTP Customer Distributions (as opposed to Feature-level Customer Distributions) from the Input Willingness To Pay (WTP) Matrix and scale them by either a fixed amount or until a target Market Share is reached.

Scaling select WTP Customer Distributions may be used when studying the impact of an advertising campaign. For example, a campaign may raise the WTP of all Products in the Market by a base amount, may then raise the WTP of the target Brand, and finally raise the WTP of the target Product itself. Scale Distributions nodes can be cascaded one after the other to simulate this Market to Brand to Product effect.

Scaling all of the Products in the WTP Matrix can be used to set a baseline number of ‘No Sale’ Customers. For example, the Scale Distributions node may iteratively alter the Customer Distributions until, say, 5% of the Market comprises of ‘No Sale’ Customers. These ‘No Sale’ Customers will enter the Market when the Price of the Products decrease or the value offered by these Products increase.

This Community Node documentation assumes you have already downloaded the open-source KNIME analytics platform and installed the free Market Simulation (Community Edition) plugin. If not, start by returning to Getting Started.

‘No Sale’┬áBaseline

This Market has initially been set up so that all Customers purchase either:

  • Spacely Sprockets,
  • Cogswell Cogs, or
  • Jetson Gears.

But the user has determined that this is unrealistic. If Prices for these Products were to drop then new Customers would enter the Market. The user has estimated that the Total Available Market (TAM) is 25% greater than the current Market Size, and hence 25% of potential Customers are currently not making any Purchase.

The ‘Scale Distributions’ node in this workflow is designed to reduce the WTP of all three Input Products until 25% of the simulated Customers select the ‘No Sale’ Product.

Inputs

Product Array

The ‘Input Product Array’ contains┬áthe set of existing Products in the Market. Each row corresponds to a Product, with the name of each Product also existing in the ‘Input WTP Matrix’.

WTP Matrix

The ‘Willingness To Pay’ (WTP) Customer Distribution matrix contains details for each Product column in the Market by each Virtual Customer row. The total number of Virtual Available Customers is equal to the number of rows in the WTP Matrix.

All nodes capable of predicting a Market Simulation require both an ‘Input Product Array’ and an ‘Input WTP Matrix’.

Simulate Market

The ‘Simulate Market’ node predicts that no Customers would currently select the ‘No Sale’ Product given their Willingness To Pay (WTP) for the other three Products in the Market. This would indicate that the WTP for the other Products is currently too high.

Node

Configuration

The ‘Scale Product Set’ selected by the user comprises the set of Products that will have their WTP change. The ‘Scale Product Set’ may or may not include the Focus Product, other Products with the same Brand, Store, Location, Family, Category or Platform as the Focus Product, and Products that are top Competitive Rivals with the Focus Product. The degree of Competitive Rivalry is determined by the sensitivity the Focus Product has to a change in Price by the other Products in the Market.

In this case, the user has selected the WTP of ‘All Products’ to change.

The ‘Scale Scenario’ is the method by which the Products in the ‘Scale Product Set’ will be changed. The WTP can be raised / lowered by a fixed amount or percentage. Or the Scale Distributions node can iteratively alter the Change Factor until a target Market Share is reached for the ‘Until Product Set’.

Here, the user has choosen to reduce the WTP until the ‘No Sale Product’ reaches 25% of the Market.

Output Market Size

The output Market Size used to scale the Quantity sold, Revenue, and Profitability for each Product in the Market.

Outputs

Port-0 Product Array

The ‘Output Product Array’ corresponds to the ‘Input Product Array’ but has updated values in the ‘Mean’ and ‘SD’ columns that reflect the altered results. The ‘Quantity’ column will also be updated according to the Market Size options.

In this case, the WTP of each Product has been reduced by 407.19 (see the ‘Mean’ column) so that 2500 Customers (25%) switch to the ‘No Sale’ Product.

Port-1 WTP Matrix

The ‘Output WTP Matrix’ contains the scaled WTP values for each Product column in the Market by each Virtual Customer row. The WTP Matrix quantifies the new maximum Price that each Customer would pay for each Product in the Market. This WTP Matrix can be directly connected to a downstream ‘Market Simulation’ or ‘Profit Engine’ node.

The ‘Output WTP Matrix’ also shows which Customers switched their preference to the ‘No Sale’ Product.

Port-2 KPI Indicators

The Output KPI Indicators contain select information about the tuning process and the quality of the final results. The final drop of the WTP values by 407.197 can also be seen here.

Port-3 Debug Trace

The ‘Output Debug Trace’ shows the incremental adjustments to the WTP Matrix during the tuning process. In this case, it shows the number of ‘No Sale’ Customers increasing from 0 to 2500. This ‘Output Debug Trace’ table is typically not used for production purposes.