Preference Regression: Realizing Consumer Benefits Preference

There are more than 7 billion people in this world. Interestingly, all of us are unique in our own way. Besides the physical appearances, our interests, our thought process and our preferences often vary significantly from one another. Now, imagine a situation in which your job is to find out what the majority of the people want and what their preferences are.

These people, better known as marketers, often need to conduct in-depth research of the market to understand consumer preferences as well as the market trends. And just like any other researchers they also need a few research techniques at their disposal to find out the data they are looking for. Preferences regression happens to be one technique which marketers rely on to identify the consumer choices in the market.

Preference Regression Definition

We all know what preference’s meaning is. Preference regression can be defined as a statistical technique that marketers use to identify the core benefits preferred by consumers. It generally provides aid to product positioning techniques such as multidimensional scaling or factor analysis. It also helps create ideal vectors on perpetual maps.

The application of this technology is quite interesting. While gathering raw information from surveys, researchers generally apply positioning techniques to find out the important dimensions and plot the position of competing products on these specific dimensions. Marketers then need to regress the survey data against the dimensions.

In this regression, the data collected in the survey are the independent variables, while the preference datum is considered the dependent variable. Like any other regression method, you need to compute the variables to predict the best outcome. Here, the resultant regression line is referred to as an ideal vector since the slop of vector is the ratio of the preferences for the two dimensions.

When you use all the data in the regression, the program will derive a single equation, and that explains why there's a single ideal vector. This is generally a blunt instrument, and that's why researchers need to refine the process with cluster analysis. The clusters represent market segments. And to get the ideal vector for each segment, researchers use separate preference regressions on each segment. 

Analysis framework: Consumer preference and sustainable competitive advantages

It is important to understand that not all brands are created equal. At times, even the most renowned brands may fail to provide their respective owners with competitive advantages. So, there’s no question of any sustainable competitive advantage. If a consumer preference has to lead to a sustainable competitive advantage, it needs to rely on these following elements:

• Customer captivity:

Customer captivity is the key element for consumer preference-driven moats. The consumer’s preference for a certain product should serve as a form of customer captivity. And it should present strong incentives that deter customers from switching. According to experts, customer captivity refers to a lack of willing on the part of the customer to change.

The basis of such a moat is the continued preference of customer for a specific brand at the exclusion of all others. Customer captivity can be initiated from different factors such as uniqueness, quality and an association with happy memories. The most crucial factor is that there should be a strong continued preference that the consumer should have for the particular brand.

• Pricing power:

Pricing power happens to be the other crucial element for the consumer preference-based competitive advantages. If the consumer’s preference for a certain brand does not give the owner the pricing power, the competitive advantage of the brand becomes limited to non-existent.

Interestingly, the pricing power does not refer to an unlimited or unchecked ability of the firm to raise the prices at any rate they want. It is recommended to every organisation that they can raise the prices of the product or services if they have a really rare product or a source of trouble for their respective portfolio.

The pricing power of a firm should manifest itself in two different elements-

1. The ability to charge a higher price for a certain product as compared to a similar product that is no way associated with similar brand preferences, endowing the business with the ability to generate impressive returns on capital.
2. The ability to pass on any cost inflation to the consumer through a price increase, allowing the firm to maintain impressive profitability through business cycles. 

Can Online Retailers Benefit from Providing Access to Competitor Price Information?

In today’s world of information technology, the asymmetry of information between the buyers and sellers is getting reduced day by day. And as it happens, by giving the consumers uncensored information about the competitors' prices, an online retailer is actually gaining the trust of the majority of the customers. While this may affect their informational advantage on the shoppers, this practice is actually seen as a form of communication openness that works as a trust-building behaviour.

It has also come to light that providing access to competitor price information can also boost the consumers’ long-term preference for a particular online retailer. According to the findings of Doney and Cannon, an organisation’s level of perceived trustworthiness has been shown to be positively related to the consumer’s future interaction with the organisation (or brand). This theory is closely tied with the concept of source credibility in the context of persuasive communication, which is further related to consumer purchase decision-making. 

How to Increase Brand Preferences?

The primary objective of almost every brand's marketing and promotional efforts is to instil brand preference among the target customers. The whole process kicks off when you start developing your brand image. And over time, you need to convince your customers that your brand offers them the best value. Here are some of the practices that help to increase brand preferences among the target market.

• Branding:

Branding is one of the long-term objectives of a company’s marketing efforts. This practice generally relies on the promotional techniques of the brand to create a particular reputation that resonates with the target audiences. No matter what kind of image you have created for your brand, consumers will still prefer to purchase products and services from your brand, if you brand offer a clear value proposition, unlike the ones with uncertainty and mixed messages.

• Research:

Market research has always been the key for improving the brand preferences. The more understand your customers, the easier it gets to appeal to them. To find out the core beliefs, your products carry into the marketplace can be quite helpful. For instance, the customers who buy high-end mobile phones usually expect to get a better service for paying the premium price. If you can understand the likes and interests of your target audiences, you can customise the offerings to present good benefits while earning a reasonable profit.

• Emphasising on benefits:

It is possible to turn a routine buyer into a loyal customer with strong brand preference. It is largely based on the customer's sense of value. Having a good understanding of the preferred product features and benefits of the target market can help you optimise your offering and promote a product concept that goes hand in hand with the market's interest. 

• Engagement:

Engagement is a crucial aspect of marketing that has made a significant contribution to the brand development activities. Personal selling, email, and telemarketing are some of the most common and traditional forms of interpersonal communication. And talking about direct and interactive forms of communication with customers – social media has made a huge contribution to brand engagement.

Customers tend to move quickly and exchange experiences among their networks in these real-time social venues. The social media presence allows your brand to engage with customers directly and address the negative discussions that can potentially impact your brand's reputation via word of mouth. 

Consumer Decision Styles Preferences

Appealing to customer preferences is considered the basic marketing technique that can help improve branding, product development, distribution, and customer experience. Some of the common forms of consumer decision styles preferences are discussed below:

• Convenience:

Convenience is a great customer motivation in today’s date. Majority of the buyers prefer product or service that is easily available at a nearby store or on an online store.

• Effort:

Another factor that is considered as customer decision styles preference is the satisfaction that results from the effort. As you may realise, customers often gain a sense of accomplishment from the projects that they do on their own.

• User interfaces:

While some prefer the simplest interface, others may like the one that has a lot of buttons and additional features. This factor may also depend on the needs of individual customers.

• Communication and information:

There can also be customer preferences related to communication style and information density. While some customers are convinced by hearing a story about a product or service, others may like to read detailed product descriptions for the same product or service.

• Stability against variety:

The preference of customers may vary on their requirements. While some may look for the same products every season, there are people who try different varieties of the same kind of product.

• Risk:

Consumer preferences may also be influenced by the risk tolerance of the customer. A lot of people are not exactly comfortable buying things from a new brand for the first time.

• Values:

Personal values may often determine what the customers are preferencing. There are people who choose eco-friendly products and services over others.

• Sensory:

Preferences can also be influenced by the sensory elements, such as colour, appearance, taste, sound and touch.

• Time:

Consumer preference is influenced by the interval of certain services. For instance, a customer may like to get his AC serviced once in two months, while another person may do the same once in two years.

• Customer service:

The customer preferences can also be different in terms of customer services. For instance, a lot of people want the customer service to be friendly, while some may actually look for a more professional approach.

• Customer experience:

This element often compels the consumer to make purchase decisions. A customer's experience with a certain brand can be a crucial factor for customer preference.

Since consumer preferences are influenced by a number of elements, it becomes difficult for marketers to gain the actual data regarding their target market. This is where the preference regression technique comes into play, and allows the marketing team to have a more accurate strategy to appeal to the consumers. 

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