Chapter 16 Alternative Evaluation and Selection

1. Chapter 16Alternative Evaluation and Selection

2. Evaluative criteria Evaluation of alternatives on each criterion Decision rules applied Alternative selected Importance of criteria Alternatives considered Alternative Evaluation and Selection Process • The McGraw-Hill Companies, Inc., 1998

3. Evaluative Criteria • Evaluative criteria are the various features or benefits a customer looks for in response to a particular type of problem: • Tangible - gas mileage, price, interior room • Intangible - style, prestige, image, feelings • Consumers may use a few criteria to reduce the alternatives, then use more criteria to decided among the remaining alternatives.

4. Measuring Evaluative Criteria • Direct measures for tangible criteria • surveys • in-depth interviews • focus groups • Indirect measures for intangible criteria • projective techniques • perceptual mapping

5. High price, high quality, high status • Heineken • Michelob • Corona • Coors • MichelobLight Rolling Rock • • Bud • Strohs BudLight CoorsLight • • NaturalLight • • Light taste, less calories, less filling Heavy taste, more calories, more filling Oly • Miller • Oly Gold • Hamms • • HammsLight Schlitz Malt Liquor • Rainier • Schlitz • Busch • Pabst • Milwaukee’s Best • • Generic Light Generic Beer Low price, low quality, low status Perceptual Mapping of Beer Brand Perceptions • The McGraw-Hill Companies, Inc., 1998

6. Measuring Performance and Relative Importance • Product Performance on Criteria: • Rank ordering scales • Semantic differential • Likert scales • Relative Importance of Criteria: • Constant sum scale • Rank ordering • Conjoint analysis

7. Using Conjoint Analysis to Determine the Importance of Evaluative Criteria 16-3 Design features Design options • Processor • MMX/233 • MMX/300 • Integrated Modem • Yes • No • Weight • 3.5 lsbs • 5.1 lbs • Price level • $2,000 • $2,500 • $3,000 These design attributes produce 24 alternative computer design configurations. One design possibility Processor: MMX/300 Modem: No Weight: 5.1 lbs Price level: $2,500

8. Consumer preferences Price Weight Modem Processor Preference Preference Preference Preference 3 2 1 0 3 2 1 0 3 2 1 0 3 2 1 0 • • • • • • • • • $2,000 $2,500 $3,000 3.5lbs 5.1 lbs No Yes MMX/233 MMX/300 Using Conjoint Analysis to Determine the Importance of Evaluative Criteria 16-3 (II)

9. Using Conjoint Analysis to Determine the Importance of Evaluative Criteria 16-3 (III) Relative importance • Processor is the most important feature in this example, and MMX/300 is the preferred option. • While price and screen size are also important, price becomes a factor between $2,500 and $3,000. Evaluative criteria Importance Processor 45% Modem 5 Weight 25 Price level 25

10. Surrogate Indicators • A Surrogate Indicator is an item that customers use to indicate the performance on some other, less observable attribute. • Predictive value • Confidence value • Typical surrogate indicators: • Brand name • Price • Country of Origin • Warranties

11. Decision Rules Used by Consumers Conjunctive: Select all (or any or first) brands that surpass a minimum level on each relevant evaluative criterion. Disjunctive: Select all (or any or first) brands that surpass a satisfactory level on any relevant evaluative criterion. Elimination- Rank the evaluative criteria in terms of importance and establish by-aspects satisfactory levels for each. Start with the most important attribute and eliminate all brands that do not meet the satisfactory level. Continue through the attributes in order of importance until only one brand is left. Lexicographic: Rank the evaluative criteria in terms of importance. Start with the most important criterion and select the brand that scores highest on that dimension. If two or more brands tie, continue through the attributes in order of importance until one of the remaining brands outperforms the others. Compensatory: Select the brand that provides the highest total score when the performance ratings for all the relevant attributes are added (with or without importance weights) together for each brand. • The McGraw-Hill Companies, Inc., 1998

12. Conjunctive Decision Rule • Select all (or any or first) brands that surpass a minimum level on each relevant evaluative criterion. • Used by customers for lower involvement products or to reduce choices on higher involvement products. • Marketers must promote acceptability on several important criteria. • The McGraw-Hill Companies, Inc., 1998

13. Disjunctive Decision Rule • Select all (or any or first) brands that surpass a satisfactory level on any relevant evaluative criterion. • Lower involvement products or to reduce choices on higher involvement products. • Concentrate promotions on at least one important criterion. • The McGraw-Hill Companies, Inc., 1998

14. Elimination-by-Aspects • Rank the evaluative criteria in terms of importance and establish satisfactory levels for each. Start with the most important attribute and eliminate all brands that do not meet the satisfactory level. Continue through the attributes in order of importance until only one brand is left. • Use for higher involvement purchases. • Marketers must know the ranking, meet important requirements, and have a differential advantage. • The McGraw-Hill Companies, Inc., 1998

15. Lexicographic Decision Rule • Rank the evaluative criteria in terms of importance. Start with the most important criterion and select the brand that scores highest on that dimension. If two or more brands tie, continue through the attributes in order of importance until one of the remaining brands outperforms the others. • Marketers must exceed all other brands on each important attribute. • The McGraw-Hill Companies, Inc., 1998

16. Compensatory Decision Rule • Select the brand that provides the highest total score when the performance ratings for all the relevant attributes are added (with or without importance weights) together for each brand. • Usually for higher involvement products. • Change beliefs, evaluation of products on criteria, change importance of beliefs, add new beliefs and make these important • The McGraw-Hill Companies, Inc., 1998

17. Graduate School Choice Example