Irwin/McGraw-Hill Chapter 16 Alternative Evaluation and Selection

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

Irwin/McGraw-Hill 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.

Irwin/McGraw-Hill Measuring Evaluative Criteria Direct measures for tangible criteria surveys in-depth interviews focus groups Indirect measures for intangible criteria projective techniques perceptual mapping

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

Irwin/McGraw-Hill 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

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

Irwin/McGraw-Hill Using Conjoint Analysis to Determine the Importance of Evaluative Criteria 16-3 (II) Consumer preferences Preference $2,000 $2,500 $3, Preference 3.5lbs 5.1 lbs Preference No Yes Preference MMX/233 MMX/300 PriceWeightModemProcessor

Irwin/McGraw-Hill Using Conjoint Analysis to Determine the Importance of Evaluative Criteria 16-3 (III) Relative importance Evaluative criteria Importance Processor45% Modem5 Weight25 Price level25 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.

Irwin/McGraw-Hill 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

Irwin/McGraw-Hill Decision Rules Used by Consumers © The McGraw-Hill Companies, Inc., 1998 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-aspectssatisfactory 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.

Irwin/McGraw-Hill Conjunctive Decision Rule © The McGraw-Hill Companies, Inc., 1998 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.

Irwin/McGraw-Hill Disjunctive Decision Rule © The McGraw-Hill Companies, Inc., 1998 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.

Irwin/McGraw-Hill Elimination-by-AspectsElimination-by-Aspects © The McGraw-Hill Companies, Inc., 1998 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.

Irwin/McGraw-Hill Lexicographic Decision Rule © The McGraw-Hill Companies, Inc., 1998 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.

Irwin/McGraw-Hill Compensatory Decision Rule © The McGraw-Hill Companies, Inc., 1998 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

Irwin/McGraw-Hill Graduate School Choice Example