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trust-is-important-in-purchasing-marijuana-pricing-research

As researchers, we are always interested in understanding consumer choices. We ask respondents to rate importance, rank priorities, and trade-off among complex configuration scenarios. We discuss and make our own trade-offs in terms of design simplicity, project cost and informational objectives. And sometimes we try new approaches.

Anyone who reads the news is aware that there is a whole new consumer product category on the horizon: marijuana is now legal for medical purposes in over 30 states and for recreational use in at least 9 of those states (as of this writing). In partnership with NJ Cannabis Media (www.njcannabismedia.com), we took the opportunity presented by this new consideration dynamic to test a new choice evaluation strategy.

Essentially, we were interested in understanding the roles of 4 factors in adult recreational-use marijuana purchase decisions. A constant sum exercise (allocation of 100 “importance points”) among self-reported current and potential users yielded the following priority distribution:

factors-in-marijuana-purchase-pricing-research-1

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Tagged in: Pricing Research

GRIT-TOP-50-report

I appreciate that we are once again in the GRIT 50 Most Innovative Research Agencies. Innovation has always been important to me and so I am quite gratified when I see our efforts being recognized. What I don't know is how people are defining innovation.

I think as an industry we sometimes label things as innovative that are not while failing to recognize some things that are genuinely innovative. In my view, innovation requires that we provide something of value that wasn't available before. Anything short of that may be 'interesting' but not 'innovative'.

I would put things like neuroscience or most AI into the "interesting" category. There is a lot of potential but so far little so show in terms of tangible benefits. Over the years at TRC we've had many ideas that showed promise, but ultimately didn't prove out (my favorite being "Conjoint Poker"). Ultimately it is the nature of innovation that some things will never leave the drawing board or 'laboratory', but without them there would be no innovation.

On the other side, I think ideas that save time and money are often not viewed as innovative unless they involve something totally new. I disagree. If I can figure out a way to do the same process faster and/or cheaper then I'm innovating. It may not look flashy, but if it allows clients to do something they couldn't otherwise do it is innovation.

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Tagged in: Pricing Research

how-to-green-marketingDo people buy green products? Yes, of course. The real question for green marketers is whether they buy enough. In other words, are green sales in line with pro-green attitudes? Not really, as huge majorities of consumers show at least some green tendencies while purchases lag far behind. Why is that? Economics tells us that consumers buy based on value (trading off cost and benefits). Since eco-friendly products are seen as being more expensive, higher prices can lower the value of a green product enough to make a conventional alternative more attractive.

While the cost trade-off is clear, it is not the only one. The benefit side has at least two major components. One is the environmental benefit, which may or may not seem tangible enough to make a difference. For instance, a dozen eggs at Acme goes for less than a dollar, while some cage-free varieties can run north of $4 at Whole Foods. So, an environmentally conscious consumer has to make a trade-off at the time of purchase – is the product worth the additional cost? For items like food, the benefits may seem small enough, and far enough out, that many may decide the value proposition does not work for them. In other product categories (say, green laundry detergent), the benefits may seem both long term and impersonal, making the trade-off even harder.

The second major component is the effectiveness of the product in performing its basic function. If consumers perceive green products as inherently inferior (in terms of conventional attributes like performance), they are less likely to buy them. So a green laundry detergent (that uses less harsh chemicals) could be seen as more expensive and less effective in cleaning clothes, further dropping its overall value. (A complicating issue is that the lack of effectiveness itself could be a perceptual rather than real problem). Unless the company is able to offset these disadvantages, the product is unlikely to succeed.

A direct way to increase demand is to offer higher performance on a compensatory attribute. In the case of LED TVs, for example, newer technology consumes less power and provides better picture quality. (Paradoxically, this can sometimes lead to the Rebound Effect, whereby greener technologies encourage higher use, thus clawing back some of the benefits). But in reality, most products are not in a position where green attributes offer performance boosts.

And of course, as it is with every other market, there are segments in this market as well. Consumers who are highly committed (dark green) are willing to buy, as the value they place on the longer term environmental benefits is high enough. And, often they are affluent enough to afford the price. But a product looking for mainstream success cannot succeed only with dark green consumers (who rarely account for more than 20% of the market). Other shades of green will also need to buy. Short of government subsidies and mandates, green marketers have to find ways to balance out the components of the value proposition for the bulk of the market.

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Tagged in: Pricing Research
3 mistakes-conjoint-in-new-product-research-pricing
Discrete Choice Conjoint is a powerful tool for among other things conducting pricing and product development research. It is flexible and can handle even the most complex of products. With that said, it requires thoughtful design with an understanding of how design will impact results. Here are three mistakes that often lead to flawed design:

 

Making the exercise too complex

The flexibility of conjoint means you can include large numbers of features and levels. The argument for doing so is a strong one…including everything will ensure the choices being made are as accurate as possible. In reality, however, respondents are consumers and consumers don’t like complexity. Walk down the isle of any store and note that the front of the package doesn’t tell you everything about a product…just the most important things.   Retailers know that too much complexity actually lowers sales. Our own research shows that as you add complexity, the importance of the easiest to evaluate feature (normally price) rises…in other words, respondents ignore the wealth of information and focus more on price. 
 

What to do:

Limit the conjoint to the most critical features needed to meet the objectives of the research. If you can’t predict those in advance, then do research to figure it out. A custom Max-Diff to prioritize features or a product like our Idea Magnet (which uses Bracket) will tell you what to include. Other features can be asked about outside the conjoint.  

 

Having unbalanced numbers of levels

Some features only have two levels (for example, on a car conjoint we might have a feature for “Cruise Control” that is either present or not present). Others, however have many levels (again on a car conjoint we might offer 15 different color choices). Not only can including too many levels increase complexity (see point 1), but it can actually skew results. If one feature has many more levels than the rest, the importance of that feature will almost certainly be overstated.  
 

What to do:

As with point one, try to limit the levels to those most critical to the research.  For example, if you are using conjoint to determine brand value you don’t need to include 15 colors…five or six will do the job.  If you can’t limit things, then at least understand that the importance of the feature is being overstated and consider that as you make decisions.  
 

Not focusing on what the respondent sees

Conjoint requires a level of engagement that most questions do not. The respondent has to consider multiple products, each with multiple features and make a reasoned choice. Ultimately they will make choices, but without engagement we can’t be sure those choices represent anything more than random button pushing. Limiting complexity (point 1 again) helps, but it isn’t always enough.   
 

What to do:

Bring out your creative side…make the exercise look attractive. Include graphics (logos for example). If you can make the choice exercise look more like the real world then do so. For example, if the conjoint is about apparel, present the choices on simulated “hang tags”, so consumers see something like they would see in a store. As long as your presentation is not biasing results (for example, making one product look nicer than another) then anything goes. 
 
These are three of the most common design errors, but there are of course many more. I’m tempted to offer a fourth, “Not working with an experienced conjoint firm”, but that of course would be too self-serving!
 
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We recently conducted an online survey on behalf of a national food brand in which we displayed various images of a grocery store’s shelf space and asked consumers to select the product they would purchase from among those shown on the shelves. This project was successful at differentiating consumer choice based on how the products were packaged, and gave our client important information on package design direct from their target consumers.

That project got me thinking about how shelf space is a limited resource, and in some cases purchase decisions are influenced as much by what’s not on the shelf as by what’s on it.

For example, my Yoplait Fruplait yogurt has gone missing. And I blame you, Greek yogurt.

Fruplait is a delicious (to me) yogurt-fruit concoction that’s heavy on the fruit. There are four single servings to a pack and there are four fruit flavors from which to choose.

I had a wonderful relationship with Fruplait up until the time Greek yogurt started hitting the shelves. With Greek yogurt muscling in and shelf space at a premium, suddenly, the number of flavors in a given store was reduced. Then some stores stopped carrying Fruplait. Now, none of the four stores at which I typically shop carries it at all (it’s still available at some retailers).

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Pricing Research in Context

Posted by on in New Product Research

My last blog about pricing research was still fresh in my mind when I read an excerpt of Craig LaBan’s recent online chat. LaBan is the Philadelphia Inquirer’s restaurant critic and offers insightful reviews and information for foodies in the region. I was intrigued by the discussion of how Federal Donuts charges different prices at the ballpark than in their stand-alone restaurant locations.

Our clients typically look for answers to how to price their products either alone or bundled. But I personally have yet to have a client ask me how to price a product differently based on the situation or context. There is good information to be had on this topic: in “Contextual Pricing: The Death of List Price and the New Market Reality” the authors point out that the pricing scheme for Coca Cola includes air temperature at the point of sale. But what tools are available to the market researcher for exploring situation-based pricing?

At its simplest level, we can ask consumers what they’d be willing to pay given a certain situation (such as in an airport or on an airplane). By using a monadic design in which similar groups of respondents are asked about a single price point, we can compare across the groups to see what the various “take-rates” would be.

Discrete choice could be employed to vary both the context and the pricing – in that way multiple situations could be tested along with multiple price points. (My colleague, Rajan Sambandam will be speaking about Behavioral Conjoint at the Insight Innovation Exchange NA event in Philadelphia in June.)

I’m not sure how Federal Donuts arrived at their pricing decision – it could very well be that the ballpark charges more rent and that factor alone determined their pricing. But when all other factors are equal, determining how much to charge can have important financial consequences.

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higgs bosonI read an article about the discovery of the Higgs Boson at CERN. This is the so called "god particle" which explains why matter has mass. While the science generally is beyond me, I was intrigued by something one of the physicists said:

"Scientists always want to be wrong in their theories. They always want to be surprised."

He went on to explain that surprise is what leads to new discoveries whereas simply confirming a theory does not. I can certainly understand the sentiment, but it is not unusual for Market Research to confirm what a client already guessed at. Should the client be disappointed in such results?

I think not for several reasons.

First, certainty allows for bolder action. Sure there are examples of confident business people going all out with their gut and succeeding spectacularly, but I suspect there are far more examples of people failing to take bold action due to lingering uncertainty. I also suspect that far too often overconfident entrepreneurs make rash decisions that lead to failure.

Second, while we might confirm the big question (for example in product development pricing research we might confirm the price that will drive success) we always gather other data that help us understand the issue in a more nuanced way. For example, we might find that the expected price point is driven by a different feature than we thought (in research speak, that one feature in the discrete choice conjoint had a much higher utility score than the one we thought was most critical).

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mrmwsignI really enjoyed my time last week at Merlien’s Market Research in the Mobile World 2011 – a great place to meet and exchange ideas with the people and companies working to make effective mobile research a reality. We discussed the nitty-gritty of mobile survey applications, and the big picture of mobile adoption around the world. Taking it all in it’s hard to argue that mobile won’t play a major role in the future of the market research industry, both in the developed and developing worlds.

Here’s the thing, though. Most of the conversation during the conference focused on the “what” of mobile research – how to reach people, or whether or not to keep surveys short(er). Very little was said about the “so what,” even though that’s where we as research professionals can earn respect and remain relevant.

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  • Ed Olesky
    Ed Olesky says #
    Great points Mike; I agree that once we nail down some of the practical methodological issues the real point is how can we use the
Conventional wisdom says that voter participation in closely contested elections is higher because of the inherent competitiveness. The logic is that people feel that their vote could be decisive in a close election and hence more turn out to vote. But is that really true? Ron Shachar has crunched the numbers from three Presidential elections using some advanced statistical analysis and says that the answer is a bit more complicated than that.     
 
While the analysis is too complex to detail here, the basic idea is quite straightforward. Does the competitiveness of an election (defined as the closeness of the race as measured by vote percentage of the two major candidates) always predict turnout, or does its effect disappear when marketing variables are included in the model? Previous research either had not considered this approach or had insufficient marketing variables to use in the model, leading to the conclusion that closeness predicts turnout. 
 
In this research data on marketing variables such as advertising and grass roots campaigning were available and included in the analysis. It turns out that when you do that, the impact of the closeness on turnout disappears. What does this mean? It means that closeness of the election drives turnout only indirectly through marketing expenditure. In fact, it is even possible in such a model to calculate the precise   impact of the marketing variables.
 
For example, increasing the proportion of the population contacted by both parties by 10% (i.e. increasing the grassroots efforts) leads to an increase of 2% points in participation, which of course is a huge improvement. Overall Shachar finds that if all marketing activity for the 2004 election had been cancelled, the number of voters would have decreased by 15 million!
 
What this research really shows is the precise and dramatic impact of marketing variables on turnout. It is not just a question of belief on the political consultants. Spending money appropriately does turn out the vote.
 
This research was conducted by Ron Shachar who is a Professor of Marketing at Tel Aviv University and is currently a Visiting Associate Professor of Marketing at Duke University. It was published in the Journal of Marketing Research.
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