Benefit Formation and Enhancement
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Benefit Formation and Enhancement Hyowon Kim1
· Dong Soo Kim2 · Greg M. Allenby2
Received: 22 April 2019 / Accepted: 2 August 2020 / Published online: 10 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract The identification of product attributes and features that are essential for a benefit to exist is critical to new product development and formulation. Some attributes are benefit enabling in the sense that their presence indicates that an offering is responsive to a need, and their absence points out that the product is not responsive. Not all agricultural products, for example, are seen as having safety advantages, and specific organic certification such as the USDA organic label may be needed for some consumers to consider an offering as providing a benefit of reducing the level of health risks. Benefit formation hinges on these critical attributes being present, while other attributes may only enhance a benefit that has already been formed. Benefit-forming attributes therefore create a specific form of interaction among product attributes that may be heterogeneously distributed in the population. We develop a model to identify benefit-forming attributes and apply it to three conjoint datasets where we provide evidence of their interactive effects on preferences. The counter-factual exercises across three datasets highlight the importance of benefit-forming attributes in product design as well as in preference segments. Keywords Conditional subadditive utility · Lancasterian model · Conjoint analysis JEL Classification C11 · C31 · D12 · M31
Hyowon Kim
[email protected] Dong Soo Kim [email protected] Greg M. Allenby [email protected] 1
Weatherhead School of Management, Case Western Reserve University, Cleveland, OH, USA
2
Fisher College of Business, Ohio State University, Columbus, OH, USA
420
H. Kim et al.
1 Introduction A basic tenet of marketing is that consumers obtain value from products through an underlying set of benefits provided by its attributes (Haley 1968; Myers 1976; Day et al. 1979; Gutman 1982). The question that we examine in this paper is whether the attributes that contribute to a benefit are exchangeable, or whether there exist attributes that are necessary for the formation of a benefit and its contribution to consumer utility. Identifying the presence of benefit-forming attributes is important to product design and segmentation in that it indicates that an offering is capable of providing utility to consumers along a specific dimension. Consider, for example, a consumer who is planning to buy a ground beef described by the attributes “organic” and “grass-fed.” Suppose that this consumer is looking to reduce health risks and believes this can occur when there is an organic seal on the package. If an organic labeling is absent, the consumer does not think that the quality of ground beef will be safe, and the other attribute – grass-fed – will not enhance ground beef quality. The goal of this paper is to develop a method to identify the attributes
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