E-RM               E-RMThis deck presents examples from E-RM‟sportfolio of two innovative and flexible,hybrid analytical a...
1. Measuring Price Sensitivity with Optimization         A well-known methodology grounded in         marketing literature...
Price Sensitivity Measurement – Methodology                           GAUGING PRICE PERCEPTION WITH 4 PRICE RELATED QUESTI...
Price Sensitivity – Methodology                                              INTERPRETATION OF THE 4 INTERSECTION POINTSIn...
Price Sensitivity – A Graphic Illustration                                           Price Sensitivity: Four Crucial Inter...
Price Sensitivity Optimizer – The Adamek Adaptation                        ADDS PURCHASE INTENT TO YIELD 4 POWERFUL QUESTI...
Price Sensitivity Curve – Maximizes Purchase Intent                          Price vs. Willingness to Purchase: Optimal Pr...
Maturity of Markets – Different Price Sensitivities                                                     SHAPE OF CURVE TEL...
2. Measuring and Modeling Customer “Satisfaction”      A methodology grounded in traditional, well      established modeli...
Separate Drivers of “Satisfaction” vs. “Dissatisfaction”  The traditional customer satisfaction model uncovers 2-way “driv...
Drivers of “Satisfaction” & Drivers of “Dissatisfaction”                                   Predictor t values,            ...
Comparisons Enabled by Two-Way Drivers AnalysisNew Insights: Two Potent One-Dimensional Issues Revealed   Attributes H and...
Applications for Split Model of Customer “Satisfaction”  Use it to identify factors that can activate “Passives” (per   G...
Both Models Require Careful Handling Price Value Sensitivity  Measurement must consider           If you know your   poss...
Call for a Consultation        Bart Zehren, E-RM        +1 847.864.7159        bz@your-research-resource.com        http:/...
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Innovations In Price & Satisfaction Research E-RM

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Simplify pricing analysis. Gain new levers for quality service management.

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Innovations In Price & Satisfaction Research E-RM

  1. 1. E-RM E-RMThis deck presents examples from E-RM‟sportfolio of two innovative and flexible,hybrid analytical approaches for: • Price Sensitivity • Customer “Satisfaction” Slide 1 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  2. 2. 1. Measuring Price Sensitivity with Optimization A well-known methodology grounded in marketing literature, easy to understand and implement in the field …cleverly adapted for simplicity and versatility. Slide 2 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  3. 3. Price Sensitivity Measurement – Methodology GAUGING PRICE PERCEPTION WITH 4 PRICE RELATED QUESTIONS Introduced by Dutch economist Peter H. van Westendorp in the 1970s, this approach is based on the premise that a bounded price range exists with a maximum (above which the product is too expensive to consider buying) and a minimum (below which consumers will doubt product credibility). Methodology: By plotting proportions of respondents against price, four curves are created that correspond to: Too Expensive, Too Inexpensive, Expensive and Inexpensive. Too Expensive Too Inexpensive Expensive Inexpensive At what price do you At what price do you At what price do you At what price do you begin to perceive the begin to perceive the perceive that the perceive the product product as so product as so product is beginning to be a bargain – a expensive that you inexpensive that you to get expensive, so great buy for the would not consider would feel that the that it is not out of the money? buying it? quality cannot be very question, but you good? would have to give some thought to buying it? 4 Points Of Intersection Between The Curves  Indifference Price Point (IPP)  Point of Marginal Expensiveness (PME)  Point Of Marginal Cheapness (PMC)  Optimal Price Point (OPP) Slide 3 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  4. 4. Price Sensitivity – Methodology INTERPRETATION OF THE 4 INTERSECTION POINTSIntersection between Intersection between„Expensive‟ and „Too Indifference Price Point (IPP) „Expensive‟ andInexpensive‟, where an equal „Inexpensive‟, where annumber of respondents equal number of respondentsbelieves the product is believes the test product is“Expensive” as that it is “Too Point Of Marginal Cheapness (PMC) “Expensive” as that it isInexpensive”. “Inexpensive”.Intersection between „Too Intersection between „TooExpensive‟ and „Too Point of Marginal Expensiveness (PME) Expensive‟ and „Inexpensive‟,Inexpensive‟, where an equal where an equal number ofnumber of respondents respondents believes thebelieves the product is “Too product is “Too expensive” asExpensive” as that it is “Too Optimal Price Point (OPP) that it is “Inexpensive”.Inexpensive”. IPP gives the median price paid by consumers already in market or the product price of a market leader. PMC and PME bound the range of acceptable prices within which a competitive product should be priced in an established market. OPP is often taken as the Optimal Price. Slide 4 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  5. 5. Price Sensitivity – A Graphic Illustration Price Sensitivity: Four Crucial Intersection Points 100% IPP % of Respondents 80% 60% PMC 40% PME OPP 20% 0% 1 2 3 4 5 6 7 Price Too Expensive Too Inexpensive Expensive Inexpensive  The curves for Too Expensive and Too Inexpensive lie below the Expensive and Inexpensive curves, respectively. Generally, more people will find a price to be Expensive/Inexpensive than Too Expensive/Too Inexpensive.  As price rises, the percentage of respondents finding the price Expensive or Too Expensive also rises, thus these two curves are positively sloped. But, as price rises, the percentage of respondents finding the price Inexpensive or Too Inexpensive falls, giving these curves a negative slope. Slide 5 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  6. 6. Price Sensitivity Optimizer – The Adamek Adaptation ADDS PURCHASE INTENT TO YIELD 4 POWERFUL QUESTION PAIRS 1. “At what price do you begin to perceive the product as so inexpensive that you would have serious doubts about its quality?” a. Now, please rate on a scale of 1 to 10 how willing you would be to purchase the product at the above mentioned price (quoted as “too inexpensive”), where 1 means „not likely at all‟ and 10 means „most likely‟. 2. “At what price do you perceive the product to be a bargain – a great buy for the money?” a. Rate on a scale of 1 to 10 how willing you would be to purchase the product at that price (quoted as “inexpensive”) ,where 1 means „not likely at all‟ and 10 means „most likely‟. 3. “At what price do you perceive that the product is beginning to get expensive, so that it is not out of the question, but you would have to give some thought to buying it?” a. Rate on a scale of 1 to 10 how willing you would be to purchase the product at that price (quoted as “expensive”), where 1 means „not likely at all‟ and 10 means „most likely‟. 4. “At what price do you begin to perceive the product as so expensive that you would not consider buying it?” a. Rate on a scale of 1 to 10 for how willing you would be to purchase the product at that price (quoted as “too expensive”), where 1 means „not likely at all‟ , 10 means „most likely‟. Slide 6 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  7. 7. Price Sensitivity Curve – Maximizes Purchase Intent Price vs. Willingness to Purchase: Optimal Price Point Optimal Price Point Inexpensive Too Inexpensive Expensive Too Expensive Acceptable Price Range  Plot means for Price and Willingness to Purchase for four price points respondents perceive as “Too Inexpensive”, “Inexpensive”, “Expensive” and “Too Expensive”.  As price increases from “Too Inexpensive” to “Inexpensive”, willingness to purchase rises. As price increases further, willingness to purchase reaches its peak – the Optimal Price Point. With continued price increases, willingness to purchase decreases. Slide 7 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  8. 8. Maturity of Markets – Different Price Sensitivities SHAPE OF CURVE TELLS A STORY  A steep curve with a narrow peak indicates a market of consumers who are familiar with the product category and well informed about prevailing prices. Price tolerances are mature, small and well defined.  Alternatively, a low, flat shape suggests a less informed marketplace with little knowledge about the product being tested. Perhaps a new product category in which consumers are less familiar and experienced. Slide 8 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  9. 9. 2. Measuring and Modeling Customer “Satisfaction” A methodology grounded in traditional, well established modeling tools, but innovative in isolating separate, underlying “drivers” of happy customers and “drivers” of unhappy customers. Slide 9 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  10. 10. Separate Drivers of “Satisfaction” vs. “Dissatisfaction” The traditional customer satisfaction model uncovers 2-way “drivers” of “Satisfaction” and Dissatisfaction (Up and Down):  Usual Model: Works Both Ways (Up and Down the scale) E-RM‟s Split Model uncovers 1-way “drivers” (Up or Down) that may exist beyond - or beneath - the usual full scale 2-way drivers (above).  Works One-Way -- Satisfaction (Up) Only  Works One Way -- Dissatisfaction (Down) Only Result: We learn HOW attributes “drive” overall ratings Up and/or Down. Ultimate Test of Value: Do we gain new information? Slide 10 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  11. 11. Drivers of “Satisfaction” & Drivers of “Dissatisfaction” Predictor t values, coefficients, etc.Split Model Concept: How attributes can “drive” overall ratings Up and/or DownFinds 1-way “drivers” within the usual model‟s full range 2-way drivers:  Both Ways (Up & Down)  1 Way: Satisfaction Only  1 Way: Dissatisfaction Only News value: Attributes can behave differently! EXAMPLE ONLY: BASED ON HYPOTHETICAL DATA Slide 11 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  12. 12. Comparisons Enabled by Two-Way Drivers AnalysisNew Insights: Two Potent One-Dimensional Issues Revealed Attributes H and I emerge as pure uni-directional “drivers” Impacts Overall Pure Uni-Directional Pure Uni-Directional Customer Satisfaction Impact on Impact on AND Dissatisfaction “Satisfaction” Alone “Dissatisfaction” Alone Attribute: E Attribute: E Attribute: I Attribute: F Attribute: H Attribute: F Attribute: G Attribute: F Theoretical results are indicated above. Actual results are situation dependent. Slide 12 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  13. 13. Applications for Split Model of Customer “Satisfaction”  Use it to identify factors that can activate “Passives” (per Goodman and Gonier, Quirk‟s - Oct. 2011) to high levels of satisfaction, and avoid contrary factors that present risks of “Passives” dropping down your “satisfaction” scale.  Use it to operationalize Kano‟s model that classifies attributes as either “Threshold” (their absence means more dissatisfaction), “Performance” (their presence and absence have leverage), or “Excitement” (exclusively high end motivators).  In employee surveys, use it to efficiently operationalize Herzberg‟s Motivation-Hygiene Theory. Slide 13 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  14. 14. Both Models Require Careful Handling Price Value Sensitivity  Measurement must consider If you know your possible brand effects, the customers‟ price/value suitability of the basic or adapted model, use of a considerations and what bounded price range and “drives” their feelings of question sequencing. happiness and unhappiness with you… “Satisfaction” Modeling  Test applications will indicate …what more do you whether fuller implementation need to know? with better attributes and a more potent overall rating (i.e., not: “satisfaction”) is well advised. Slide 14 E-RM, 2011. All Rights Reserved - Privileged and Confidential
  15. 15. Call for a Consultation Bart Zehren, E-RM +1 847.864.7159 bz@your-research-resource.com http://your-research-resource.com http://www.linkedin.com/in/bartzehrenerm Evanston, IL - USA Slide 15 E-RM, 2011. All Rights Reserved - Privileged and Confidential
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