Marketing Research Aaker, Kumar, Day and Leone Tenth Edition Instructor’s Presentation Slides 1

Marketing Research 10th Edition Chapter Twenty-two 2 Multidimensional Scaling and Conjoint Analysis

Marketing Research 10th Edition Multidimensional Scaling Used to: Identify dimensions by which objects are perceived or evaluated Position the objects with respect to those dimensions Make positioning decisions for new and old products 3

Marketing Research 10th Edition 4 Perceptual map Attribute data Nonattribute data Similarity Preference Correspondence analysis MDS Discriminant analysis Factor analysis Approaches To Creating Perceptual Maps

Marketing Research 10th Edition Attribute Based Approaches Attribute based MDS - MDS used on attribute data Assumption ▫The attributes on which the individuals' perceptions of objects are based can be identified Methods used to reduce the attributes to a small number of dimensions ▫Factor Analysis ▫Discriminant Analysis Limitations ▫Ignore the relative importance of particular attributes to customers ▫Variables are assumed to be intervally scaled and continuous 5

Marketing Research 10th Edition Comparison of Factor and Discriminant Analysis Identifies clusters of attributes on which objects differ Identifies a perceptual dimension even if it is represented by a single attribute Statistical test with null hypothesis that two objects are perceived identically Groups attributes that are similar Based on both perceived differences between objects and differences between people's perceptions of objects Dimensions provide more interpretive value than discriminant analysis 6 Factor Analysis Discriminant Analysis

Marketing Research 10th Edition Perceptual Map of a Beverage Market 7

Marketing Research 10th Edition 8 Perceptual Map of Pain Relievers Gentleness. Tylenol Effectiveness. Bufferin. Advil. Nuprin. Excedrin. Private-label aspirin. Bayer. Anacin

Marketing Research 10th Edition Basic Concepts of Multidimensional Scaling (MDS) MDS uses proximities (value which denotes how similar or how different two objects are perceived to be) among different objects as input Proximities data is used to produce a geometric configuration of points (objects) in a two-dimensional space as output The fit between the derived distances and the two proximities in each dimension is evaluated through a measure called stress The appropriate number of dimensions required to locate objects can be obtained by plotting stress values against the number of dimensions 9

Marketing Research 10th Edition Determining Number of Dimensions 10 Due to large increase in the stress values from two dimensions to one, two dimensions are acceptable

Marketing Research 10th Edition Attribute-based MDS Advantages Attributes can have diagnostic and operational value Attribute data is easier for the respondents to use Dimensions based on attribute data predicted preference better as compared to non-attribute data 11 Disadvantages If the list of attributes is not accurate and complete, the study will suffer Respondents may not perceive or evaluate objects in terms of underlying attributes May require more dimensions to represent them than the use of flexible models

Marketing Research 10th Edition Application of MDS With Nonattribute Data Similarity Data Reflect the perceived similarity of two objects from the respondents' perspective Perceptual map is obtained from the average similarity ratings Able to find the smallest number of dimensions for which there is a reasonably good fit between the input similarity rankings and the rankings of the distance between objects in the resulting space 12

Marketing Research 10th Edition Similarity Judgments 13

Marketing Research 10th Edition Perceptual Map Using Similarity Data 14

Marketing Research 10th Edition Application of MDS With Nonattribute Data (Contd.) Preference Data An ideal object is the combination of all customers' preferred attribute levels Location of ideal objects is to identify segments of customers who have similar ideal objects, since customer preferences are always heterogeneous 15

Marketing Research 10th Edition Issues in MDS Perceptual mapping has not been shown to be reliable across different methods The effect of market events on perceptual maps cannot be ascertained The interpretation of dimensions is difficult When more than two or three dimensions are needed, usefulness is reduced 16

Marketing Research 10th Edition Conjoint Analysis Technique that allows a subset of the possible combinations of product features to be used to determine the relative importance of each feature in the purchase decision Used to determine the relative importance of various attributes to respondents, based on their making trade-off judgments Uses: ▫To select features on a new product/service ▫Predict sales ▫Understand relationships 17

Marketing Research 10th Edition Inputs in Conjoint Analysis The dependent variable is the preference judgment that a respondent makes about a new concept The independent variables are the attribute levels that need to be specified Respondents make judgments about the concept either by considering ▫Two attributes at a time - Trade-off approach ▫Full profile of attributes - Full profile approach 18

Marketing Research 10th Edition Outputs in Conjoint Analysis A value of relative utility is assigned to each level of an attribute called partworth utilities The combination with the highest utilities should be the one that is most preferred The combination with the lowest total utility is the least preferred 19

Marketing Research 10th Edition Applications of Conjoint Analysis Where the alternative products or services have a number of attributes, each with two or more levels Where most of the feasible combinations of attribute levels do not presently exist Where the range of possible attribute levels can be expanded beyond those presently available Where the general direction of attribute preference probably is known 20

Marketing Research 10th Edition Steps in Conjoint Analysis 1 Choose product attributes (e.g. size, price, model) 2 Choose the values or options for each attribute 3 Define products as a combination of attribute options 4 A value of relative utility is assigned to each level of an attribute called partworth utilities 5 The combination with the highest utilities should be the one that is most preferred 21

Marketing Research 10th Edition Utilities for Credit Card Attributes 22 Source: Paul E. Green, ‘‘A New Approach to Market Segmentation,’’

Marketing Research 10th Edition Utilities for Credit Card Attributes (Contd.) 23

Marketing Research 10th Edition Full-profile and Trade-off Approaches 24 Source: Adapted from Dick Westwood, Tony Lunn, and David Bezaley, ‘‘The Trade-off Model and Its Extensions’’

Marketing Research 10th Edition Conjoint Analysis - Example MakePriceMPGDoor 0Domestic$22, DR 1Foreign$18, DR 25

Marketing Research 10th Edition Conjoint Analysis – Regression Output 26

Marketing Research 10th Edition Part-worth Utilities 27

Marketing Research 10th Edition Relative Importance of Attributes AttributePart-worth Utility Relative Importance Make1.29% Price4.232% MPG5.239% Door2.720% 28

Marketing Research 10th Edition Limitations of Conjoint Analysis Trade-off approach The task is too unrealistic Trade-off judgments are being made on two attributes, holding the others constant Full-profile approach If there are multiple attributes and attribute levels, the task can get very demanding 29