Sensitivity analysis in marketing

In fact, sensitivity analysis allows you to determine how to change the conclusions of a study depending on possible variations in factors or errors in the estimates made. In this way, the rationale for the decision-making process is improved, as it provides a better understanding of the overall risk that exists in various alternative actions.

Sensitivity analysis can test various profitability indicators of a marketing project involving investment in a new product by changing the assumptions underlying the calculation of these estimates. Through these measurements, the influence of each factor on the outcome of the model is established and the factors that are very important in the decision on choosing a strategy are identified.:

strong impact factors;
factors with high uncertainty.

Sensitivity calculations in marketing are done not only to indirectly measure the risk that results from changes in results resulting from erroneous estimates. Sensitivity analysis is also useful for implicitly examining the risk that exists in one product design compared to another.

An important area of marketing in which sensitivity analysis is applied is the research of new product development projects. The analysis can be done at the design stage, when the prototype has not yet been implemented and is used as a means of selecting those variables to which most resources and research are devoted.

As part of the sensitivity analysis, systematic changes can be made to the values of each factor in order to determine the impact of these changes on the outcome.

The analysis shows that the cost of production factor is of particular importance for making an investment decision, both as an effect of economic leverage and uncertainty. Based on this information, the decision maker will be able to focus his efforts towards reducing production costs or at least reducing the uncertainty associated with these costs. Modeling programs allow you to evaluate the sensitivity of the results to changes in input factors. By running a simulation program that changes the distribution of the input coefficient, it is possible to determine the effect of added or changed information or its absence. It can be noted that an important change in some input factors does not significantly affect the outcome, while a reduced modification of other factors leads to important changes in the net present value or other indicators of project profitability.

Sensitivity analysis can be performed in both simulation and analytical models (linear programming, decision tree, etc.). One of the most commonly used analytical methods is parametric linear programming. Inside it, the sensitivity of the solution is checked in accordance with variations in the coefficients of the objective function or technological coefficients.

Sensitivity analysis, although useful in many situations, has some limitations. They do not allow us to specify the probability with which the initial option or other alternative solutions will be implemented, and marketing realities are characterized by emphasized dynamism, in which variables often change simultaneously, in different rhythms and values. You can use our exclusive 1xbet promo code free bet to receive up to a ₹65,000 welcome bonus on your first deposit. These have benefits for both the platform and the customer. The customer gets a free bet, free spins or free bonus money, while the website gets more customers. Every user is looking for an opportunity to make registration with a bookmaker more favorable.