Each consumer makes his or her car purchase decision by simultaneously weighing diverse criteria, including brand, cost, performance, fuel economy, comfort, styling, service, environmental friendliness, and more. But if you asked individuals how they weigh these criteria — and many a carmaker has tried — they would be hard-pressed to articulate their decision-making process. Consumers’ choices in today’s complex marketplace are beyond the ability of even the consumers themselves to describe.
A consumer choice modeling project focused on hybrids would offer people different vehicle options and allow them to think like car buyers as they compared their typical car preferences (in other words, past purchases) with various hybrid possibilities. This study would focus on the reasons individuals make specific trade-offs among various options, such as fuel usage, CO2 emissions, battery range, performance, vehicle design, and price. With this data, auto companies could then deduce whether various consumer segments really want an environmentally responsible car, what features they are looking for, and, most important, how much they would be willing to pay. The efficacy of consumer choice modeling is that it allows manufacturers to isolate and identify customer preferences among an array of realistic product offerings without having to ask the open-ended question, “What do you want?”
We believe that consumer choice modeling is ideally suited for analysis of the most complex consumer decision processes and that it yields valuable insights for demand-driven strategy development by providing customer value segmentation maps, measuring market share impact of new product–service combinations, and assessing overall brand equity. Perhaps most important, choice modeling can reveal salient differences between managers’ beliefs about customers’ needs and preferences and customers’ actual needs and preferences. For managers seeking reliable feedback on how customers view their products and services, consumer choice modeling provides a rigorous way to turn customer-driven feedback into profitable and sustainable tactics for retaining or capturing market share.
John Jullens is a principal with Booz & Company in Cleveland. He specializes in demand-side transformation issues, including revenue growth strategies, brand management, customer retention, and retail channel effectiveness.
Gregor Harter is a partner with Booz & Company based in Munich. He focuses on the telecommunications and technology sector, developing market strategies and improving operational performance.