Conjoint Simulator How Profit Is Calculated

The statistical model predicts the probability that each option will be chosen. Because there is uncertainty in that calculation, the projection if averaged across several realizations from the model.  

That gives us share of choice - it's kind of like market share, but not exactly.

This share of choice is purely about demand. However, sales is at the intersection of demand and supply.

So we can simulate supply conditions (like awareness and distribution). Then the estimated share values are usually much closer to the marketplace share of units.

Note: It is important to note this is not share of revenue, which is what most people think of when they hear market share. The conversion is easy, but the natural model outcome is share of units.

Once you have a solid share number, the math gets even easier.

When you multiply share by the market size (in units) that will give you the unit forecast for each option in the simulator.

Revenue is Units multiplied by Price.

Profit is Revenue minus (fixed and variable) costs.