“New way to measure consumers´ judgments” By Paul E. Green and Yoram Wind

1. “New way to measure consumers´ judgments” By Paul E. Green and Yoram Wind Group 6 Jessica Greve Monique Hodges Tara Hulet Margo Hurdt Alejandro Roman Van Tran

2. Authors Paul E. Green Professor of Marketing at the Wharton School. Background in mathematics and statistics. Yoram Wind Professor of Marketing at the Wharton School. Member of the editorial board of the Journal of Marketing and the Journal of Business Research.

3. Two Basic Factors • Market recognition • Nature of the product • Product may have several attributes and qualities for diverse number of consumers. • Different techniques have been developed and used to evaluate consumers´ judgments.

4. Conjoint Measurement • Conjoint measurement is a statistical technique to determine how people value different features that make up an individual product or service. • Objectives • Different algorithms are used to estimated utility • functions • Conjoint measurement in the twenty first century

5. Present Products New Product How Conjoint Measurement Works K2 R GLORY BISSELL

6. Develop a New Spot Remover of Carpet How Conjoint Measurement Works

7. Three Package Designs : A, B and C • Three Brand Name : K2R, Glory, and Bissell • Three Prices : $ 1.19, $1.39, and $1.59 • The Good Housekeeping Seal • Money – Back Guarantee Three– Level Factor How Conjoint Measurement Works Two– Level Factor

8. Independent Contributions Separate Weight Factors How Conjoint Measurement Works

9. How Conjoint Measurement Works

10. How Conjoint Measurement Works

11. Evaluate by Computer Programs • Ranked Data of a Single Respondents Entered in the Program. • Search for a Set of Scale Value for Each Factor in the Experimental Design. • Add Together the Total Utility of Each Combination that Correspond to the Original Ranks as Closely as Possible. Computing the Utilities

12. 0.5 0.6 0.3 Computing the Utilities 0.1 0.3 0.2

13. 0.7 Computing the Utilities 0.2

14. Importance of Attributes • Utility scales are expressed in a common unit. • Attributes help compare utility ranges from factor to factor. • Help find their relative importance to the consumer.

15. Importance of Attributes Green P., Wind Y. (1975) . New way to measure consumers’ judgments. Harvard Business Review, 107-117.

16. Importance on Attributes continued • Relative size of utility ranges • Package, design, and price are the most important factors. Green P., Wind Y. (1975) . New way to measure consumers’ judgments. Harvard Business Review, 107-117.

17. Importance of Factor • Ex. Had a price ranged from 1.19 to a high of 1.89 and its relative importance could exceed that for package design. • Factor importance calculations provide a useful by-product of the main analysis regardless of such limitations. • Relative importance of a factor depends on levels that are included in the design.

18. Managerial Implications • Use results to design a product marketing strategy. • Conjoint measurement technique is useful to managers in modifying current products or services and designing new ones. • Utility compared to other brands to provide companies a quantitative measure of value for their own company and their image as well as their competitors.

19. Air Carrier Study Option 1 Option 2 Depart Time: four hours of the time you would like the leave. Flight is rarely late to destination. Stops: None Flight Attendants: “Cold and Curt” • Depart time: two hours of the time you would like to leave. • Stops: two intermediate Stops • 50% full • Flight Attendants: “Warm and Friendly”

20. Replacement Tires Study • Tread life: 40,000 miles • Price: $55 per tire • Store location: 10 minutes from your home • Tread life: 30,000 miles • Price: $40 per tire • Store location: 10 minutes from your home • Tread life: 50,000 miles • Price: $85 per tire • Store location: 20 minutes from your home

21. Potential Uses for Conjoint Measuring • New products changing physical or chemical characteristics • Packaging design & brand name • Pricing and brand alternatives • Descriptions of new products or services • Alternative services designs

22. Judgmental Criterion • Best Value for the money • Convenience of use • Suitability for a specified type of consumer or for a specified end use • “Psychological Images”

23. Designing Bar Soaps Study of psychological imagery of bar soap characteristics and use of soaps appropriateness Soap Variations: weight, size, shape, color, fragrance type, intensity, etc. Examined and assigned soap that best matched characteristics Analyzed data by conjoint measurement techniques Study shows capability of changing various physical variables into changes in psychological variables

24. Verbalized Descriptions of New Concepts Product classes design factors are infinite and expensive to vary physically for evaluation Researchers resort to verbally describing factors of interest Study conducted among car owners

25. Two-at-a-Time Factor Evaluation Procedure Green P., Wind Y. (1975) . New way to measure consumers’ judgments. Harvard Business Review, 107-117.

26. Organizations As Consumers Problem: How to increase its share of lab test business Study: How do physicians decide where to send their lab test? Physicians were sent 16 profiles to show different set of characteristics the lab held Utility functions were developed for each factor and management decided to emphasize convenience factors over test reliability factors

27. Marketing Strategy Simulations • The role that utility measurement plays in the design of strategic marketing simulators is a principal use of conjoint measurement. • Consumer evaluations of airline services were conducted in which consumer utilities were developed for 25 different service factors. • Utility functions for each of the different airline services differed according to the length and purpose of flight.

28. Marketing Strategy Simulations • First: Obtained consumers evaluations of service profiles • Second: Obtained information about perceptions of the airlines on each of the service factors. • Purpose: Estimate market share effect that a change in service configuration of the sponsors service would have. • Used simulator to examine the effect of assumed retaliatory actions by its competitors and to see what happens to market share if utility functions changed. • New service configuration was evaluated against the base period configuration.

29. Limitations of Conjoint Measurement • Number of applications are too small to establish a convincing track record • Some products and services may involve utility functions and decision rules not captured by models of conjoint measurement • Essence of some products and services may not be captured by a decomposition approach that assumes the researcher can describe an alternative in terms of its component parts

30. Other Techniques for Qualifying Consumer Judgments • Factor Analysis • Measures consumers perception of products and services • vs. Conjoint Measurement Green P., Wind Y. (1975) . New way to measure consumers’ judgments. Harvard Business Review, 107-117.

31. Other Techniques for Qualifying Consumer Judgments cont’d • Perceptual Mapping • Measures consumers perception of products and services • vs. Conjoint Measurement Green P., Wind Y. (1975) . New way to measure consumers’ judgments. Harvard Business Review, 107-117.

32. Other Techniques for Qualifying Consumer Judgments cont’d • Cluster Analysis • Comparison technique for portraying the similarities of various objects or as a basis for grouping people with common perceptions of preferences • vs. Conjoint Measurement Green P., Wind Y. (1975) . New way to measure consumers’ judgments. Harvard Business Review, 107-117.

33. Conclusion • What is conjoint analysis? • Why should marketers study multivariate analysis techniques?

34. Questions?