New Way to Measure Consumers’ Judgments

1. New Way to Measure Consumers’ Judgments Presented By: Team 4 Sandra Salas Lin Yuan

2. Authors Paul E Green • Professor of Marketing at the Wharton School, University of Pennsylvania • Mathematics and Statistics • Measurement and Data Analysis Yoram Wind • Professor of Marketing at the Wharton School, University of Pennsylvania • Consumer and Industrial Buyer Behavior

3. New Way to Measure Consumers’ Judgments • Conjoint Measurement • Examples of Studies Applying CM • Other Techniques for Quantifying Consumers’ Judgments

4. Conjoint Measurement Definition • “A new measurement technique from the fields of mathematical psychology and psychometrics that can aid the marketing manager in sorting out the relative importance of a product’s multidimensional attributes.” (p. 3)

5. Other Important Definitions • Mathematical Psychology • “a branch of the main study of Psychology which aims to develop mathematical models to predict the outcomes of underlying processes.” Psychology Dictionary • Psychometrics • a branch of Psychology dealing with the “use of quantitative devices for assessing psychological trends.” Merriam-Webster Dictionary

6. Conjoint Measurement “…starts with the consumer’s overall judgments about a set of complex alternatives. It then performs the … job of decomposing [the consumer’s] original evaluations into separate and compatible utility scales by which the original global judgments can be reconstituted.” (p. 3)

7. How CM Works • The Carpet Cleaner Study • Computing the Utilities • Importance of Attributes • Managerial Implications • The Air Carrier Study • The Replacement Tire Study

8. The Carpet Cleaner Study 5 Factors (expected to influence consumer evaluation) • (3) Package design • (3) Brand name • (3) Price • (2) Good Housekeeping seal of endorsement • (2) Money-back guarantee

9. 3-Level Factors • Package Design

10. 3-Level Factors • Brand Name • Price • $1.19 • $1.39 • $1.59

11. 2-Level Factors • Good Housekeeping Seal of Endorsement • Yes • No • Money-Back Guarantee • Yes • No

12. Possible Combinations (3) Package design (3) Brand name (3) Price (2) Good Housekeeping seal (2) Money-back guarantee =108 Possible Alternatives (only 18 were used)

13. Orthogonal Array Definition • “experimental design … in which the test combinations are selected so that the independent contributions of all five factors are balanced.” (p. 4)

14. Test Process • Researcher • makes up 18 cards including sketches of the 3 package designs and the verbal details regarding the other 4 factors • describes new product’s features and functions • shows respondents each of the 18 cards • Respondents • Rank the cards in order of their preference or likelihood-of-purchase orderings

15. Orthogonal Array: Sample of Ranking

16. Computing the Utilities • Process • Ranked data is entered into computer programs • Computer searches for set of scale values for each factor • Limitations • Only 18 of 108 alternatives are used • Only ranked data are supplied (data themselves do not determine how much more influential one attribute is than another for the respondent)

17. Results of Computer Analysis

18. Utility Functions • U (A) = 0.1 • U (B) = 1.0 • U (C) = 0.6

19. Total Utility for Combination # 18 • U(C)= 0.6 • U(Bissel)= 0.5 • U(1.19)= 1.0 • U(GHSY)= 0.3 • U(MBGY)= 0.7 • Total 3.1

20. Importance of Attributes • All utility scales are expressed in a common unit • Utility ranges from factor to factor can be compared to see their relative importance • U (A) = 0.1 • U (B) = 1.0 • U (C) = 0.6

21. Utility Ranges Package Design 1.0 – 0.1 = 0.9 Good Housekeeping Seal 0.3 – 0.2 = 0.1

22. Relative Size of the Utility Ranges Package design(1.0 – 0.1 = 0.9) Brand name (0.5 – 0.2 = 0.3) Price (1.0 – 0.1 = 0.9) Good Housekeeping seal (0.3 – 0.2 = 0.1) Money-back guarantee (0.7 – 0.2 = 0.5)

23. Managerial Implications • Critical Question: • “How these results can be used in the design of a product/marketing strategy?” (p. 5) • Points for discussion • Which is/are the most desirable offering(s)? • Will the use of a Good Housekeeping seal of approval enhance the attractiveness of the product’s overall offering? • Etc…

24. The Air Carrier Study • Combinations: 27 different flight profiles • Rating • based on the respondent’s flying preferences • 7-point scale • Focus • Air travelers’ evaluation of 2 jet planes flying across the Atlantic to Paris • Relative value by length of flight vs. relative value by type of traveler (business vs. vacation travelers)

25. 8 Factors • Carrier • Aircraft • Departure time relative to ideal • Punctuality of arrival • Passenger load • Number of stops en route • Attitudes of flight attendants • Entertainment

26. Utility Functions for Air Travelers to Paris

27. Findings • 2 factors comprised the biggest utility differences: • Punctuality of arrival • Attitudes of flight attendants • Utility difference between the two jet planes is very small • Other factors to center attention around • Departure time • Number of stops

28. Other Findings • For business-oriented travelers “the importance of type of aircraft did increase slightly with length of flight.” (p. 5) • “Extensive replacement of older aircraft would not result in major shifts in consumer demand. Money might better be spent on improving the scheduling aspects of flights and the attitudes and demeanor of flight personnel.” (p. 5)

29. The Replacement Tire Study • Focus • Pretesting several TV commercials for sponsor’s brand radial tires • Utility functions of respondents interested in each TV commercial • Rating: based on the respondent’s preferences • Conjoint measurement exercise was part of larger study • Cards: 7 ordered categories • 25 profiles based on orthogonal array • 625 possible combinations

30. Results • Most important factors: • Tread mileage • Price • Least important factor • Brand Name (5) • Most popular TV commercial • Stressed tread mileage and good value for the money

31. Potential Uses of CM • The Bar Soaps Study • Verbalized Descriptions of New Concepts • The Car Owners Study • Organizations as Consumers • The Clinical Laboratory Study

32. Consumer Evaluations can be obtained on: • New product formulations • Package design, brand name, and promotional copy combinations • Pricing and brand alternatives • Verbalized descriptions of new products or services • Alternative service designs • Etc.

33. Any judgmental criterion can be used • Preference or likelihood-of-purchase orderings • Best value for the money • Convenience of use • Suitability for a specified type of consumer or end use (The bar soap study) • Distinctiveness, conservativeness, and other “psychological images” • Etc.

34. The Bar Soap Study • Conducted for a laboratory and marketing personnel of a soap manufacturer • Related psychological imagery of physical characteristics of bars of soap to end-use appropriateness

35. Process • Researcher presented different bars of soap constructed around a variety of combinations of soap characteristics • “Respondents assigned each bar to the end use that they felt best matched its characteristics” (p. 7)

36. The Bar Soap Study Physical Variables • Color • Type of fragrance • Intensity of fragrance • Size • Shape • Etc. EndUses • Moisturizing facial soap • Deep-cleaning soap for oily skin • Woman’s deodorant soap • Man’s deodorant soap

37. The Bar Soap Study • Analyzed by conjoint measurement techniques that search for a set of psychophysical functions for each characteristic of soap • Results • Most important physical variable to match end-use appropriateness: Type of fragrance • Least important: Fragrance intensity • Medicinal fragrance and color blue: best combination to match bars to man’s soap and deep-cleaning soap

38. The Bar Soap Study • “Illustrates the feasibility of translating changes in various physical variables into changes in psychological variables.” (p. 7) • Laboratory personnel can design bars of soap to evoke any desired imagery in the consumer’s mind. • Other industries can use similar studies to develop a “psychophysics of taste.”

39. The Car Owners Study • Rogers National Research, Inc • 2-at-a-time Factor Evaluation Procedure • Focus: The effects of gas mileage, price, country of manufacture, maximum speed, roominess, and length on consumer preferences for new vehicles

40. For each of the 6 questions below, please write in the numbers from 1 to 9 to show your order of preference for your next new car 1 = first choice, 9 = last choice

42. Results • Gas mileage and country of manufacture were highly important factors • Large-car owners considered gas economy an important factor more than ever

43. Organizations as Consumers • Conjoint Measurement is not limited to consumer applications • Organizational buyers also seek to benefit from supply alternatives • Organizational buyers’ evaluations are one of the most important inputs to industrial marketing strategy • The Clinical Laboratory Study

44. The Clinical Laboratory Study • Laboratory concerned with how to increase its share of lab test business • Focus: The assessment of how physicians “subjectively value different characteristics of a clinical laboratory” before choosing a test lab (p. 7)

45. Process • Physicians received 16 profiles of hypothetical lab services • Profiles showed different set of characteristics • Reliability of test results • Pick-up and delivery procedures • Convenience of location • Price range of services • Billing procedures • Turnaround time • Utility functions were developed for each factor

46. Marketing Strategy Simulations • Utility measurement plays an important role in the design of strategic marketing simulators. • Strategic marketing simulation is “one of the principal uses of conjoint measurement” (p. 8) • The Airline Services Study

47. The Airline Services Study • Large-scale study • Respondents evaluated airline services • Consumer utilities developed for 25 service factors • Utility functions were developed on a route and purpose-of-trip basis • Obtainable Data • Evaluation of airline services • Data regarding perceptions of each airline

48. Simulation of Airline Services over all Major Traffic Routes • Purpose • “Estimate the effect on market share that a change in service configuration would have, route by route, if competitors did not follow suit” (p. 9) • Other Uses • Show “which competing airlines would lose business and which ones would gain business under various changes in perceived service levels” (p. 9)”

49. Prospects and Limitations • Few companies use CM • CM’s potential is difficult to asses • Limitations • Difficult to establish compelling track record of success in predicting outcomes • Models of CM are not always fitted for all products and services • “Essence of some products and services may not be well captured by decomposition approach” (p. 9)

50. Prospects and Limitations • Generally, CM copes well with understanding how managers can approach consumers’ problems that rely on evaluations of complex products’ alternatives • “Early experience suggests some interesting prospects for measuring consumer tradeoffs among various product or service characteristics.” (p. 9)