1 Brand Positioning – Attributes February 1, 2005 Cola Wars: Pepsi versus Coca Cola 1. What attributes and benefits do soft-drinks offer? Which are physical and which are psychological? Which are "essential" and which are consumers willing to be flexible on? 2. Why did people react so strongly when New Coke was introduced? 3. Comment on the design of the New Coke study – what would you have changed? Case Discussion
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1
Brand Positioning – Attributes
February 1, 2005
Cola Wars: Pepsi versus Coca Cola
1. What attributes and benefits do soft-drinks offer? Which are physical and which are psychological? Which are "essential" and which are consumers willing to be flexible on?
2. Why did people react so strongly when New Coke was introduced?
3. Comment on the design of the New Coke study – what would you have changed?
Case Discussion
2
Brand with attributesresponsive to DCCg
Prospects who experience DCCg, i.e., targets
Specific price (e.g., $1.79)
Media vehicles, Attentional strategy, Brand claims
Specific exchange venues
Competitors Implicated by DCCg
Identify kinds of demand-creating condition
(DCCa - n); Assess state of want-
satisfaction for each kind; Order DCC with a view to
roi and choosing DCCx to target
e.g., domestic US
e.g., calendar 2003, 4
Some version of product category X
Define prospectse.g., people who buy/use
product category X or engage in corresponding activity Y.
State broad price band (e.g., discount, premium)
State tentative ideas for media type
State tentative ideas for exchange venue type
State competitors implicated by choices on other dimensions
All importances (part-worths) measured relative to these levels.
Part-Worth Analysis
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Analysis of Part-Worths
Brand Name: MasterCard = 0Visa = 2Discover = 0
Implication: MasterCard and Discover valued equally. Visa valued more.
Part-Worth Analysis
Analysis of Part-Worths
Interest Rate:18% = 015% = 112% = 1
Implication: Consumers are indifferent to a 15% or 12% rate, but both are preferred to an 18% rate.
Part-Worth Analysis
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Analysis of Part-Worths
Annual Fee:None = 0$10 = -1$20 = -1
Implication: Consumers are indifferent to a $10 or $20 annual fee, but prefer no annual fee to either amount.
Part-Worth Analysis
Analysis of Part-WorthsCredit Limit:
$1000 = 0$2500 = 2$5000 = 3
Implication: Consumers prefer a $5000 to either a $2500 or $1000 limited. The change from $1000 to $2500 is twice as important as the chance from $2500 to $5000.
Part-Worth Analysis
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Analysis Across Attributes
Brand Name: MasterCard = 0Visa = 2Discover = 0
Interest Rate:18% = 015% = 112% = 1
Annual Fee:None = 0$10 = -1$20 = -1
Credit Limit:$1000 = 0$2500 = 2$5000 = 3
Value of Visa vs. MasterCard = Value of $2500 vs. $1000 Credit Limit
Value of 15% vs. 18% Interest = Value of $0 vs. $10 Annual Fee
Value of $5000 vs. $2500 Credit Limit = Value of 15 vs. 18% Interest
Part-Worth Analysis
Attributes Play Two RolesDesired attributes are the basis of consideration
set formation and preference orderings.
Market DefiningAttributes that form consideration sets are market
defining – without them there is no hope of attracting a prospect.
Brand PositioningOther attributes play a role in brand positioning –
consumers are willing to tradeoff one attribute level for another.
Theory
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Screening Rules
“A Choice Model with Conjunctive, Disjunctive, and Compensatory Screening Rules”
Conjunctive rule: alternative must be acceptable on all attributes.
Disjunctive rule: alternative must be acceptable on a least one attribute.
Compensatory rule: really good attributes can make up for really bad attributes.
Challenge Paper
A partial listing of offerings and features of digital camerasfrom Nov. 2002 Consumer Reports
*Attributes unique to APS cameras at the time of the study
Attribute Levels
Basic body style Low and standard Mediumfeatures High
Mid-Roll NoneChange* Manual
Automatic
Annotation* NonePre-SetCustomized ListCustom List 1Custom List 2Custom List 3
Camera Operation NoFeedback* Yes
Attribute LevelsZoom None
2x4x
Viewfinder RegularLarge
Camera Settings NoneFeedback LCD
ViewfinderBoth
Price $41 - $499
Challenge Paper
Alternative Approach
Traditional choice model:Pr(i) = Pr(xi’β + εi > xk’β + εk for all k)
Proposed choice model:Pr(i) = Pr(xi’β + εi > xk’β + εk for all k
such that I(xk,γ) = 1)
Threshold levels
Challenge Paper
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Empirical Application – Conjunctive Model
Proportion Screening on Each Attribute
40%
8%6%
4% 4% 4% 5%
19%
4%
22%
41%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Body S
tyle
Mid-Roll
Cha
nge*
Annota
tion1
*
Annota
tion2
*
Annota
tion3
*
Annota
tion4
*
Op. Fee
dbac
k*Zoo
m
Viewfin
der
Setting
sPric
e
*Attributes unique to APS offerings at time of study. Challenge Paper
0%
10%
20%
30%
40%
50%
60%
70%
10%
20%
30%
41%
59%
<$276 <$356 <$425 <$499 >$499
Empirical Application – Conjunctive Model
Distribution of Price Threshold
• Respondents who “almost always” take their camera when attending “social gatherings away from” home have higher price thresholds.
Challenge Paper
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Empirical Application
Findings
• Conjunctive model fits data best
• 92% of respondents are forming consideration sets
• Results show which attributes, which levels, and who is screening
• Respondents tend to screen alternatives using familiar attributes
• After controlling for the their effect in forming considerationsets, screening attributes are “less important” than indicated by the standard choice model
Challenge Paper
Market Simulations
Make competitive market scenarios and predict which products respondents would choose
Accumulate (aggregate) respondent predictions to make “Shares of Preference” (some refer to them as “market shares”)
Market Simulators
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Which Color is Preferred?Consider the following utilities:
Blue Red YellowRespondent #1 50 40 10Respondent #2 0 65 75Respondent #3 40 30 20
---- ---- ----Average: 30 45 35
Red has the highest average preferenceBut, does any one respondent prefer red?
Market Simulators
Which Color is Chosen?Assume each respondent “chooses” preferred color:
Blue Red Yellow ChoiceRespondent #1 50 40 10 BlueRespondent #2 0 65 75 YellowRespondent #3 40 30 20 Blue
---- ---- ----Average: 30 45 35
Blue “chosen” twice, Yellow once
Market Simulators
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Why Conduct Market Simulations?
• Simulations better reflect real-world behavior– Represent idiosyncratic preferences of segments and
individuals (remember, you don’t have to appeal to the “fat” part of the market to carve out a profitable business)
• A “choice laboratory” for testing multitude of real-world possibilities
• Results expressed in terms that make sense to management and are actionable