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Stanford guru on consumer habits

Prerna Raturi | February 16, 2005

Stanford's V Seenu Srinivasan uses mathematical formulae to predict consumer behaviour.

You would think he is a soothsayer of sorts. Last year, Adams Distinguished Professor at Stanford Graduate School of Business V Seenu Srinivasan correctly predicted which job offer each of his students at the B-school would take up.

But before you ask him to foretell your career path, he reveals his secret -- conjoint analysis, a technique used to quantify the value that people associate with different levels of product or service attributes. In this case, the jobs being offered by several companies.

Srinivasan explains with an example. Consider buying a digital camera. You may decide that nothing less than a five mega-pixel resolution will do.

If that is the case, you may reject a model regardless of how cheap it is or what other features it has. Your friend, on the other hand, may want a five mega-pixel digicam, but may just consider the model you rejected if its price was, say, less than Rs 10,000 -- after all, different people care about different things in a product.

"All these customer preferences can be analysed and quantified, keeping the thresholds -- different priorities for different people -- in mind," he says. "Most importantly, this research is easy on the person who is being surveyed but gives you powerful responses."

Conjoint analysis is one of the most important innovations in the field of marketing. The tool has gained so much popularity that it is now being used across segments -- the social services sector, health care, white goods and so on.

In fact, Srinivasan has used the method to conduct research for several companies -- on Nissan for the market potential for subcompact cars; Wells Fargo, for designing alternative checking account fee plans; Guidant systems, for the market potential for alternative angioplasty catheter specifications; and Godrej-Sara Lee, India, for the market potential for alternative designs of mosquito mats.

An internationally-acclaimed specialist in marketing, Srinivasan did some primary work in the early 1970s on the evolution of conjoint analysis.

His other research areas are new product development, market structure analysis and brand equity measurement. In addition to a 30-year teaching experience at Stanford, 60-year-old Srinivasan also taught for three years at the Indian School of Business, Hyderabad, and received the highest teacher rating among all courses for the 2002-03 academic year.

And it's not difficult to understand why. With several international awards to his credit -- including the famous ORSA, O'Dell and John Little awards for best paper and the Churchill award for lifetime achievement in marketing research -- Srinivasan effortlessly explains complex issues in plain English, and does not resort to the jargon for which most management gurus are infamous.

The examples he cites are from everyday life, the instances are taken from his own experiences and the conversation never flags.

Simplifying concepts may be his forté but dispelling myths on research appears to be a priority, too. According to Srinivasan, in the current research environment, there's little room for preconceived notions that ail marketers and management students.

For instance, people can be divided into demographic groups -- low-income, high income, male, female and so on. But there is a tendency to try and box people into predetermined categories.

Srinivasan gives the example of Stanford, which most people assume is peopled by a homogeneous group -- everyone must be well-to-do, have certain tastes, live by certain philosophies and so on.

"But the reality hits you when you look at the car parking. You see them all -- second-hands, Chevrolets, BMWs, convertibles, extremely run-down cars.... And that's just the start of the reality check. There is a lot of variability, which means you may need to take a large sample of people," advises Srinivasan.

The need to be flexible is an issue that comes up again and again. According to Srinivasan, conducting any kind of research on the basis of a set list of questions is "pretty dumb".

After all, there are psychographic variables, he points out. "After you get a few answers from the respondent, you know a little about him and should ideally change the questions," he explains.

"Such adaptive data is more authentic."

But apart from the correct way of carrying out research, marketers also need to understand who are the people to target when selling a product. That's elementary -- you classify the consumers.

According to Srinivasan, there are three kinds of consumers -- those loyal to your brand, those loyal to the competitor's brand and those who haven't made up their minds.

"It is the undecided bunch the company has to target in the right way," he adds.

And then when you make changes to your brand image and the product after consumer feedback, experimentation does not come easy in all sectors.

It isn't too difficult in the fast-moving consumer goods sector and brand variations need not be too expensive. In fact, FMCG companies can initially afford to give discounts, which makes the cost of these products go down even further.

It's a different story where durables are concerned. Since they cost much more, consumers think twice before they buy something that looks and feels new, and different.

But although the cost of durables may be high in the beginning, they keep decreasing with time. Srinivasan goes back to the digicam example. "Some years ago, it was impossible to buy even a two mega-pixel digicam with a common man's salary.

"It is the same with plasma televisions -- prices will come down," he predicts.

According to Srinivasan, constant research done the right way is the key to predict consumer behaviour. For an avid reader of Hindu mythology, he certainly knows how to get the facts right.


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