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Conjoint-rational-irrational

I’m a big fan of Russ Roberts’ podcast Econtalk. While technically about economics he covers a variety of subjects with his guests and it always gives me something to think about. Recently he welcomed Mary Hirschfeld of Villanova University to talk about her book “Aquinas and the Market”. She challenges some of the fundamentals of modern Economics.

Economists typically see “rational” behavior as one in which a person attempts to maximize their wealth. This leads to the behavioral economic principles that see choices that don’t maximize wealth as “irrational”. For example, an unemployed baseball fan catches a multi-millionaire player’s 500th home run ball. The baseball is likely worth tens of thousands of dollars so if the fan gives it back to the player that is deemed “irrational”.

Dr. Hirschfeld might see this differently. She feels that economics itself is irrational…it fails to recognize the value of non-monetary aspects of a transaction. The fan might think the player actually deserves the ball more than the fan and thus puts value in doing the right thing…returning the ball to its rightful owner.

She repeatedly makes the point that wealth is a means to an end and that focusing on it will not maximize your value as a human being. The rational human thinks about what they really need materially, spiritually and emotionally. They can then make the trade-offs necessary to maximize their overall well-being. They might decide that teaching math in a disadvantaged area, even though they will make less, is a better fit for them than say taking a job on Wall Street.

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Can AI Help in Finding Optimal Pricing?

Posted by on in Pricing Research

Facial-Recognition-Technology pricing-research

Technology is simply brilliant! If I didn’t already embrace that fact, “60 Minutes” reinforced that upon me with their article about Kai-Fu Lee, the “Oracle of Artificial Intelligence” recently.

A company of Mr. Lee’s, Face ++, has deep-learning facial response programs that can tell educators which students are engaged, bored or confused during classroom lectures. Teachers can see at what point during lecture these responses happened, and can follow up with the individuals.

And, modern kitchens can re-order supplies for you, such as your fridge noting the milk or eggs are empty, or when you have used any of the food you purchased. The fridge can automatically contact your supplier and new food arrive before you even knew it was needed.

But, the practical success of technology has its limitations. The teachers can be alerted as to which students were excited/confused by the lecture, but the software does not know “why” it happened, and doesn’t know anything more than the facial response identified. “60 Minutes” notes that “a typical AI system can do one thing well, but can’t adapt what it knows to any other task.”

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Girl-Scout-cookies-TURF-Market-Research-analysis

Every winter one of my co-workers at TRC reminds us that Girl Scout Cookie Season is upon us. GSCS (my abbreviation) is a time to call attention to, celebrate and support the agency dedicated to building “girls of courage, confidence, and character, who make the world a better place.”  All well and good, but when it comes down to it, I just want the cookies.

Their best sellers year after year – Thin Mints, Peanut Butter Patties/Tagalogs and Carael Delites/Samoas – contain chocolate. But I don’t eat chocolate (doctor’s orders). Which means every year I hold my breath until I learn whether my favorite GSC – the Lemonade – is still on the list. And thankfully, it is being offered once again in 2019. I ordered 5 boxes from my co-worker’s daughter.

My no-chocolate policy makes me a “niche” consumer of not only GSCs but of snacks and candies in general. When Hershey came out with Hershey Gold in 2017 (essentially a chocolate bar without the chocolate), I thought they had developed it just for me! I hadn’t eaten a candy bar in years until I tried that one. Now it’s my go-to when I need a little something sweet.

But the problem with niche markets is they are small by definition. I worry that with a limited market, eventually Lemonades and Hershey Gold will be dropped in favor of more popular products.

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customer-lifetime-value-pricing-research

I was reading Russell Perkins blog (Russell and his firm Infocommerce group help clients develop product strategy and new product development) about the use of Customer Lifetime Value (CLV) in Relationship Scoring. He takes note of a new trend to apply CLV across all customer touchpoints.


As researchers the concept of CLV is something we are quite familiar with. It seeks to take into account everything known about a customer (these might include factors ranging from past purchase and payment behavior to things like credit score, income or level of education) in order to determine the value that customer is likely to bring over their lifetime.


Relationship scoring then uses this to determine how the customer should be treated. High value customers are given opportunities from better customer service to special offers. Is this idea really all that new?  


In many respects it is not. Long before advanced algorithms firms recognized that some customers were more valuable than others. For example a good butcher knew how important each customer was and provided perks to them (like setting aside the best cuts of meat).

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how-to-google-pricing-research

I spent a very long time on Amazon and Staples.com recently trying to find a replacement for the little hand-held gadget that I use to clip crossword puzzles out of my newspapers. Typing “Paper cutter” in the search box didn’t get me there. And neither did “Scissors”. I eventually gave up. It wasn’t until I saw it in a good old-fashioned mail-order catalog that I learned it is called a “Gift wrap cutter.” And so I was finally able to go back online and order one.

There are two important lessons here for researchers.  
 
The first is never assume that the way you refer to something is universally understood.
Our clients use a lot of acronyms and short-hand to describe their products, much of which is insider-speak. Testing that terminology with an uninitiated audience helps to overcome this problem. At TRC we have a group called the Questionnaire Review Committee. A member who is not involved in that project reviews the survey instrument prior to fielding. Anything that isn’t understood is flagged for further review
 
The second is that potential customers may not consider themselves as being in the market for a given product, even if they are. 
I didn’t realize I wanted a gift wrap cutter, but it turns out that’s exactly what I needed. A potential research client who isn’t aware of the pricing research options available to him can’t search on “conjoint study providers” to find a suitable research partner.  But he can search on his business objective:  “how to price a product” or “pricing research”. And when that search sends him to us, we can tell him that a conjoint study is an appropriate approach.     
   
The way products and services are presented in the marketplace - their names, labels, tags and descriptions - are important. But if potential customers don’t know of your product, or don’t know how to describe it, we can still reach them based on their need, the job to be done, or a solution to a problem that the product offers. In a research questionnaire, screening for ‘likelihood to purchase X product’ may not capture the same range of potential customers as “likelihood to purchase a product that does Y” would. We need to keep this in mind when deciding who does and doesn’t qualify as a prospective customer in our research questionnaires. And also in marketing our own services.  
 
Tagged in: Pricing Resarch
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