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February 1, 2013

“Driver Analysis” for Designing Products & Related Communication Strategies in line with Consumer Preferences

Driver analysis as a technique is widely used by marketers to understand which brands or product/service attributes have the greatest influence on consumers’ purchase decision. For instance, consumers might rate a personal care product based on its colour, scent, functionality, price, brand ambassador, whether there is a discount offer, and so on. 

All of this will eventually help marketers in:
-          Identifying the right product offering for launching a new brand/variant
-          Narrowing in on the right target group for their brand
-          Designing the right sales & marketing communication strategy
Consumption is driven by different kind of needs. As per the Hierarchy of Needs by Maslow, people are motivated to fulfil the most basic needs before moving onto more advanced needs. At the lowest level are the most basic, physiological needs. As we move up, are safety needs, social needs, self-esteem and finally self-actualization needs at the top of the pyramid.
Driver analysis helps us identify the consumer needs which translates to purchase behavior - if it’s functional aspect (physiological or safety needs) or if it’s imagery in consumers’ mind (having an ipod is considered cool by friends and adds to the self-esteem) or if the customer is delighted with his experience and is extremely loyal to the product (“I know this is what I want, don’t really care what others say about it”--self-actualization).

Driver analysis is the statistical effect of many independent variables on the dependent variable, which is our focus. For instance, sales of a product  might be driven by a variety of factors like functional attributes like price, likability, quality or emotional attributes like brand imagery.
How do we prioritise the Key Drivers?
There are many statistical techniques for the analysis, simplest being correlation analysis, to determine the association with a product’s overall performance & the perceived performance of brand on separate attributes.  Though it is simple, it doesn’t discriminate between the most important & the least important attributes.

A second method is multivariate regression, which explains overall market performance as a function of ratings on separate attributes. However, due to multi-collinearity (correlation amongst the independent variables) they can cause aberrant results. For instance, it may appear that 2 attributes are very important, but due to multi-collinearity, we may not be able to measure their unique influence.
Another approach used by industry experts which proves to be better than the above mentioned methods is path analysis. SEM or Structural Equation Modeling is a widely used Path analysis technique.  
SEM identifies the relationship that an observable customer behaviour (like purchase intent, satisfaction levels etc.) has with latent constructs. These latent constructs cannot be measured directly, instead factor together variables that show similar customer behaviour. SEM however, is a confirmatory and not an exploratory approach.  It requires a clearly defined hypothesis to begin with.
Another approach developed in the recent times, is Bayesian networks. It is a graphical model that encodes probabilistic relationships among variables. This is much simpler to execute as compared to SEM. Combined with Bayesian statistical techniques, it has the scope for exploratory analysis and doesn’t require a hypothetical model.

Case Study:  A leading hair care manufacturer wanted to identify drivers of brand preference for the category which would aid them in designing the right communication strategy

Framework:
Built a Structural Equation Model (SEM) to identify key equity themes and their hierarchy in terms of importance in driving purchase for the category, for each of the markets
- Identify the best pathway to improve brand’s equity in target consumer’s mind for each of the markets
Result:
The following recommendations were made and implemented by the business:
Leverage brand’s strength on the “health” dimension which goes in line with brand’s equity pyramid
- “Ingredient” is one of the key category drivers on which the brand is performing very well--strengthen communication strategy to capture this
- Even though health benefit is the key, consumers eventually desire the beauty aspect – redesign communication strategy to convey this as the end benefit
- Currently “beauty” dimension is weak – build credibility on that with consistent communication

More details on the case study can be found here.

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