By Nick Pangallo
A few weeks ago, I found myself seated at a trendy Mexican restaurant in Minneapolis, an eager participant at one of the more enjoyable business lunches I’ve encountered lately. As you might expect, the topic quickly turned from the vagaries of the marketing life to the weather, summer vacation stories, the gym, far-too-early holiday planning (I’m looking at you, Target), and then, unexpectedly, to dieting. It was there where I learned Jim Garrity, SVP and head of CMB’s Financial Services, Insurance & Healthcare Practice, was quite a fan of Weight Watchers, one of the few truly successfully long-term dieting options out there – it earned Consumer Report’s highest mark for nutrition analysis.
Jim had become a devotee of the Weight Watchers PointsPlus® plan, which, for someone I’d fancied a meat-and-potatoes man like me, came as a bit of a surprise. But as Jim continued to discuss the program and what he enjoyed about it, I realized that PointsPlus® was nothing more than another example of CMB’s brand and product development bread-and-butter: the tradeoff exercise.
For those not familiar with how it works, PointsPlus® assigns a numeric point-value to each meal/snack/dessert/shake/whatever you can buy through the program, based on protein, carbohydrates, fat and fiber content. The system will then give you a daily points target, taking into account your height, weight, age and gender; read more about it here. Simply stay at or under your target, and…well, that’s it.
This, as you might expect, presents our would-be dieter with a daily flurry of choices. Do you have the bagel with cream cheese or the fresh fruit for breakfast? Go with a savory salad or a slim sandwich for lunch? And how do these choices affect what you have “left” at dinner? Sorry to burst your bubble, eager reader, but if you want that red velvet cake, you’re going to have to pass on the cream cheese.
Built on the economic principle of opportunity cost (the idea that to buy a product or undertake an activity, that product/activity must necessarily replace something else you might have bought or engaged in), these sorts of tradeoffs are exactly what we seek to model when researchers help develop brands, products, messaging campaigns, or basically anything else with a give-and-take. You can’t be the industry leader and try harder. If you want to offer premium customer service, you’re going to have to charge a bit more. Anyone who’s ever made a budget, whether on a ledger or www.Mint.com, understands that if you go to the concert, you might have to skip the movies this week.
Our job, then, is to master the usage of methodological techniques which replicate these real-world tradeoffs within a research setting. Almost all of my clients take advantage of Maximum-Difference Scaling, an exercise where participants select which items/features/messages/etc. they like most and least, four options at a time. By forcing this tradeoff, we can accurately prioritize huge lists of information in short order, not only rank-ordering but also sizing the distance between items. Many also use allocations, which allow participants to assign different values to a set of given options, but knowing there are only so many points to go around (often 100). My brand and product development engagements often utilize Discrete Choice (or Conjoint) Modeling, an extremely powerful form of tradeoff exercise where participants must choose between holistic brand positionings or fully-configured products. We can then deconstruct their decisions, analyze the tradeoffs, and find those pesky drivers of decision-making that are the foundation of marketing as we know it.
Think about it this way: if you’re still with me, you’ve traded off the time you could’ve spent watching E!, playing Candy Crush, or checking Facebook in favor of a little lesson in economics and research. So what’ll it be, then–the pasta or the seafood?
Nick is a Project Manager within CMB’s Financial Services, Insurance & Healthcare Practice, as well as a poker-playing behavioral economics and game theory nerd. You can follow him on Twitter @NAPangallo. He would always choose the pasta.
As researchers, we move through life a bit differently than other people. We can’t watch television commercials without thinking about how well the spot tested (or if it was tested at all). We’ll pause in front of an in-store display and carefully consider whatever’s at eye level. We spend so much time helping clients understand consumer behavior that it really becomes impossible to turn that perspective off in our personal lives; in fact, in many ways that 24/7 perspective is arguably what makes us good at what we do. And it can work to our advantage in our personal lives as well.
Recently, I bought my first house – a big decision for anyone. As I was thinking about the kinds of things most people consider while house hunting (new versus old, proximity to the city, layout, price, school district, commute, etc), I naturally moved in to “research mode” and ran my own mini discrete choice. I was thinking about all of my options in a way that gauged my purchase interest. In many ways I was simplifying the “product” (in this case, my house) and my decision by separating “must haves” from “nice to haves.”
When you think about it, discrete choice is everywhere, especially in situations where the “product” has a high value – and therefore more risky. Take another big purchase like an engagement ring, for example. What matters most in the purchase process? What are the “must haves” and what are the “nice to haves”? Once a company understands what the consumer values most in their decision making process, the rest of the story becomes so clear.
We worked with a well-known national jewelry company to understand the value of a branded diamond. Does the brand of a diamond fall on the “nice to have” or the “must have” side of the purchase decision? How much would brand ultimately stand up to the 4Cs (cut, clarity, color, and carat weight) in an engagement ring purchase? The research showed that consumers were far more driven by the 4Cs and confirmation of the stone’s authenticity than they were by the brand name. Consumers have been “trained” to value those 4C’s as the most important decision factors when purchasing a diamond. In this example what really mattered was value, defined not just by the cost of the investment but also by the return. What are you really getting for your money? Unless money is no object, isn’t that what you want to maximize when purchasing a home or any big purchase?
Investing in, asking, and understanding what moves the customer through the purchase process is far more critical than guessing or assuming an investment is worth making, because guessing wrong can cost way more in the long run. Whether we realize it or not, we are constantly making trade-offs, in our purchase decisions and in life in general. We have to. But for companies, understanding what those trade-offs are and how they differ by customer segment can unlock tremendous value.
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Tara Lasker, Director of Project Operations, is currently knee deep in renovations but a proud new owner of a 130-year-old Victorian home.