PIE: A Holistic Preference Concept and Measurement Model
49 Pages Posted: 16 Sep 2010 Last revised: 27 Dec 2013
Date Written: December 27, 2013
Extant preference measurement research, including conjoint analysis, is done in the isolation of one’s own mind. That is, it remains completely silent on the explicit influence of others in the formation of consumer preferences. This paper proposes a new holistic framework of preference, PIE, as well as a measurement method to remedy this problem. The new paradigm posits that consumers evaluate products based on different “needs” which are determined by three sources: (1) P, the physical attributes of the product; (2) I, the individual characteristics of the choice maker; and (3) E, characteristics of an external peer group. To provide an empirically feasible method to capture all three sources of information, we propose and test an incentive-aligned approach, a group-sourced mechanism, which mimics a real life consultation of a consumer making a purchase decision in the presence of her friends. Our results provide support for the PIE framework, including superior predictive performance in a conjoint task that is “stacked against it”. We also show how firms can apply the PIE framework for product design. Practitioners, however, must weigh carefully the benefits of the group-sourced preference measurement with the heavier cognitive burden on the respondents in completing the task.
Keywords: preference measurement, conjoint analysis, incentive alignment, mechanism design, new products
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