Editor's note: Steve Cohen is partner and co-founder of in4mation insights.
For many of us, daily life has changed beyond all expectation during the pandemic. Consumers are finding that they need to reassess their spending in response to changes in personal circumstances and the rising cost of goods. There's greater focus on the way we budget and get the most for our money. By necessity, we make trade-offs that drive our buying behavior in a search for greater value.Â
Of course, it's not just price that affects what we purchase. Many factors influence consumer behavior and the way we budget. As researchers, how can we help our clients optimize the value that a consumer places on a product or service? How do we help steer their innovation and product strategies so that they can prioritize the features and options offered in products and price them accordingly?
There are tried-and-true research methodologies that have enabled analysts to yield highly impactful results for years. But one size does not fit all. There are new tools and technologies that improve upon standard choice models and if we aren’t leveraging the new tools to our advantage, if we aren’t building on existing tools with new thinking, are we not missing the opportunity to do better? To know more? To create greater value for our customers and our companies?
To start with, let's consider how people make decisions. If you gave someone three or four different purchase options, with varied features and prices, we could assume they would go through some mental math to evaluate each of the choice alternatives. As noted above, we're expecting them to make trade-offs between the benefits that the features offer and the price that must be paid. Marketing scientists use this principle to work out what the most probable choice would be for each item in a set of alternatives.
Choice models have been a very important tool in market res...