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Taking choice modeling to the next level | SKIM at FOCI 2013

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Taking choice modeling to the next level | SKIM at FOCI 2013
by SKIM on May 16, 2013 Edit
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At The 2013 Future of Consumer Intelligence conference, SKIM thought leaders, Eline van der Gaast and Joris Huisman, shared new methods and techniques for expanding the ability to create forward looking models accounting for rational and emotional choice behavior. These models enable marketers and product developers to make strategic and tactical decisions.

For more information about this presentation, visit http://www.skimgroup.com/skim-at-foci-2013.

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  • On the one side you see a very famous example by Henry Ford who mentioned the customer could have any color they wanted as long as it was black. If you nowadays go to the Ford website you can completely design your own ideal car. You can select your favorite color from a big range and complement the base model with additional options and / or packages. This also brings a new challenges in terms of the research that we do.

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  • 1. expect great answersTaking choice modeling to the next levelMay 2013
  • 2. Eline van der Gaast@Eline_FrederiekJoris Huisman@JorisHuismanSKIM@SKIMgroup2
  • 3. 3 Courtesy of Wordle.net & IMDB.com
  • 4. Why do we experiments?Experiments enable us to create andcontrol the virtual environment of a momentof truth and observe responses to your newdevelopments and strategies4
  • 5. 5JORISThrough experiments we canunderstand and model choicebehaviorBasic example ofDiscrete ChoiceModeling
  • 6. NEW choices require NEW techniques andmethodologies6Menu-Based ConjointMulti-stakeholder Choice ModelingIntegrating emotional drivers of choice
  • 7. Freedom of Choice7
  • 8. The shopping experience is an ever evolvingenvironment….8
  • 9. …. leading to increased freedom of choice for theconsumer9You can have any color youwant as long as it is black.Choice from numerousdifferent packages, optionsand colors.
  • 10. How can we understand consumerbehavior in a highly customizableenvironment?10
  • 11. The answer is Menu-Based Conjoint (MBC)11Option 1 $Option 2 $$Option 3 $-Option 4 $Option 5 $+Option 6 $$$$$ $ $+Which car wouldyou choose?Total price = $Which of the followingoptions would you chooseon top of this car?VS.
  • 12. It’s the difference between…12$$ $ $+Option 1 $Option 2 $$Option 3 $-Option 4 $Option 5 $+Option 6 $$$Total price = $ORANDVS.
  • 13. What does it give us?13$$ $ $+Option 1 $Option 2 $$Option 3 $-Option 4 $Option 5 $+Option 6 $$$Total price = $Optimal pricing per carUptake and optimalpricing per featureVS.
  • 14. MBC - Car options14
  • 15. Base price: $10,000Driver comfort$ 440Sport package$ 760Cabin Comfort Plus$ 265Metallic paint $ 450Heated mirrors $ 150Alloy Wheels $ 350GPS navigator $150GPS alarm $ 320MBC - Car optionsComfort Seat $ 90Parking sensors $ 195Rain sensor $ 265Air conditioning $ 90Audio system $ 75Heating seats $ 165 Navigation Pack$ 375Total price $10,00015
  • 16. Base price: $10,000Driver comfort$ 440Sport package$ 760Cabin Comfort Plus$ 265Metallic paint $ 450Heated mirrors $ 150Alloy Wheels $ 350GPS navigator $150GPS alarm $ 320MBC - Car optionsComfort Seat $ 90Parking sensors $ 195Rain sensor $ 265Air conditioning $ 90Audio system $ 75Heating seats $ 165 Navigation Pack$ 375Total price $10,00016
  • 17. Base price: $10,000Driver comfort$ 440Sport package$ 760Cabin Comfort Plus$ 265Metallic paint $ 450Heated mirrors $ 150Alloy Wheels $ 350GPS navigator $150GPS alarm $ 320MBC - Car optionsComfort Seat $ 90Parking sensors $ 195Rain sensor $ 265Air conditioning $ 90Audio system $ 75Heating seats $ 165 Navigation Pack$ 375Total price $10,00017
  • 18. Base price: $10,000Driver comfort$ 440Sport package$ 760Cabin Comfort Plus$ 265Metallic paint $ 450Heated mirrors $ 150Alloy Wheels $ 350GPS navigator $150GPS alarm $ 320MBC - Car optionsComfort Seat $ 90Parking sensors $ 195Rain sensor $ 265Air conditioning $ 90Audio system $ 75Heating seats $ 165 Navigation Pack$ 375Total price $10,00018
  • 19. Base price: $10,000Driver comfort$ 440Sport package$ 760Cabin Comfort Plus$ 265Metallic paint $ 450Heated mirrors $ 150Alloy Wheels $ 350GPS navigator $150GPS alarm $ 320MBC - Car optionsComfort Seat $ 90Parking sensors $ 195Rain sensor $ 265Navigation Pack$ 375Total price $11,355Air conditioning $ 90Audio system $ 75Heating seats $ 16519
  • 20. Base price: $10,000Driver comfort$ 500Sport package$ 760Cabin Comfort Plus$ 230Metallic paint $ 550Heated mirrors $ 150Alloy Wheels $ 350GPS navigator $ 250GPS alarm $ 420MBC - Car optionsComfort Seat $ 90Parking sensors $ 195Rain sensor $ 265Air conditioning $ 90Audio system $ 75Heating seats $ 165 Navigation Pack$ 475Total price $10,00020
  • 21. Base price: $10,000Driver comfort$ 500Sport package$ 760Cabin Comfort Plus$ 230Metallic paint $ 550Heated mirrors $ 150Alloy Wheels $ 350GPS navigator $ 250GPS alarm $ 420MBC - Car optionsComfort Seat $ 90Parking sensors $ 195Rain sensor $ 265Air conditioning $ 90Audio system $ 75Heating seats $ 165 Navigation Pack$ 475Total price $11,18521
  • 22. $450 $500$400MBC - Car options - So what?%DriverComfortPricePrice Sensitivity Take-up ratesDriver comfortComfort SeatParking sensorsRain sensor$ 500$ 90$ 195$ 26518.5%7.2%11.3%9.9%22
  • 23. Menu-Based Conjoint enables you to optimizecustomizable products and portfolio23Car options is just one example…
  • 24. Multi layered and interactive choice behavior24
  • 25. The physician-patient relationship has changed25Patients have more information and ask more questions
  • 26. ?How do you determine which message will have the greatest impact on the dialogue?Optimized messaging strategy = More prescriptions, more compliance26 FOCI 2013 |
  • 27. How do we account for complex interactionsbetween different stakeholders in thedecision making process?27
  • 28. A fictitious business case:A prescription painkiller28What is the optimal communication strategy?Objective: measure preference and differentiation for eachmessage; forecast impact on share and revenue• 4 new positioning statements• Existing product• Strong competition• Significant patient involvement
  • 29. Patients differ from each other29Mrs. AMr. ZMs. JSure, doctor, thank you!Not if I have to pay for it myself!I read something else on Wikipedia!
  • 30. Physicians differ too30Dr. Medcalf Dr. HutchinsonDr. AlbanBecause Isay so!How does itmake you feel?The data speaksfor itself…
  • 31. What happens if they meetin the doctor’s office?31Mrs. AMr. ZMs. JDr. Medcalf Dr. HutchinsonDr. Alban
  • 32. 3223%35%13%50%51%45%41%33%Message 1 Message 2 Message 3 Message 4Share of choice of painkiller (%)Patients DoctorsWINNING MESSAGE%Shareofchoice
  • 33. 3323%35%13%50%51%45%41%33%34%40%29%42%Message 1 Message 2 Message 3 Message 4Share of choice of painkiller (%)Patients Doctors AdjustedWINNING MESSAGE%Shareofchoice
  • 34. Using a bridging variable we weigh the response of thephysicians to account for the behavior of the patient34Simulatephysicianpreferenceswith no patientrequestSimulatepatientpreferenceswith physicianrecommendationRecalculatephysicianpreferenceswith the patientpreferencesOutput:simulatorof market share andsales revenue foreach message testedDecision Influence Modeling Process
  • 35. And again there are many other situations where weneed to model complex interactions...35
  • 36. Mimic reality36
  • 37. 37MoodTemperamentDisposition    BehaviorMotivationEmotionalRational Behavior  
  • 38. 38Easy access to audiovisualtechnology enables us to createand control the (virtual)environment of decision makingexperiment and observe reactionand responses to the stimuli
  • 39. 39A virtual shelf puts aconsumer in a realistic contextof his purchase decision
  • 40. 40It also allows us to track therespondents virtualconsiderations….Even though this respondent boughtSnapple, we can see that they areattracted by the Arizona packaging= Mouse tracking
  • 41. 41… and with eye trackingtechnology we can even makethis assessment more intuitive
  • 42. 42Can we include more of the iceberg inour choice models?
  • 43. 43
  • 44. How can these innovations make your life easier?44
  • 45. How will these innovations make you life easier?45Menu-Based ConjointMulti-stakeholder ChoiceModelingEmotional Drivers of ChoiceImprove your pricing strategy of customizableproducts based on price sensitivity of featuresAccount for interaction between differentstakeholders in your communication strategyBase your business decision on rational andemotional drivers of choice of your customers
  • 46. Visit our booth for a fresh ‘stroopwafel’!Eline van der Gaast | New Venture DirectorE.Vandergaast@skimgroup.com@Eline_FrederiekelinevandergaastJoris Huisman | New Venture DirectorJ.Huisman@skimgroup.com@JorisHuismanjorishuisman