Monday, October 1, 2007

SDM approach sheds light on how culture affects consumers - SDM Pulse, Fall 2007

Vinay Deshmukh, SDM ’06, far right, poses with his
teammates on the All Nippon Airlines project. They
are, from left, Daniela Reichert, program director for
the MIT International Science and Technology
Initiatives–Japan (MISTI–Japan); Patricia
Gercik, managing director of MISTI–Japan;
Sharmila C. Chatterjee, visiting professor at
MIT Sloan; Zachary Smith, LFM ’08; and
Olivier Ceberio, MBA ’08.
By Vinay Deshmukh, SDM ’06

Last spring, All Nippon Airlines (ANA), a leading Japanese airline and the 2007 winner of Air Transport World’s Airline of the Year award, piloted an interdisciplinary project to investigate how culture influences U.S. consumers’ perceptions and behavior. The effort, intended to inform ANA’s plans to expand in the United States, was initiated by Patricia Gercik, managing director of the MIT International Science and Technology Initiatives–Japan (MISTI–Japan).

After submitting a marketing write-up and going through an interview process, three students were selected for the project—Zachary Smith LFM ’08, Olivier Ceberio MBA ’08, and myself.

We were asked to:
•Determine consumers’ attitudes toward Japanese products and services versus U.S. products and services
•Perform a comparative analysis of these attitudes
•Assess what effect, if any, country of origin has on consumer perceptions and willingness to buy
•Assess what cultural influences, if any, affect consumer perceptions and willingness to buy
•Assess what factors are most important to consumer decision-making when choosing an airline, hotel or automobile

Taking a systems approach, the team laid out a general path diagram for the project. Marketing scales for measuring constructs of interest were compiled from research papers as well as from the American Marketing Association’s Marketing Scales Handbook and SAGE Publications’ Handbook of Marketing Scales. We used many SDM tools throughout the project.
Figure 1. Survey structure and path diagram

To ensure that acculturation effects were taken into account, we used a three-dimensional model to rate customer preference for Japanese versus U.S goods and services. This enabled us to plot the preferences of a consumer with dual loyalties—for instance, someone of French origin who had lived in the United States for a long time and feels a high degree of association with both French and American cultures. Such a customer would be plotted in a 3-D space somewhere between “wholly associated with French” and “wholly associated with American” culture, with the third factor being “cosmopolitanism,” the degree of association with global culture.

We anticipated that if culture played a significant role in a consumer’s decision, then there would be an inverse relationship between cultural distance and preference for products and services from that culture. Thus, the greater the distance of a consumer from the Japanese culture, the lower the likelihood of this consumer preferring Japanese products and services and vice versa.

We designed the survey to measure both dependent variables, such as willingness to buy a product or a service and preference for Japanese goods and services, as well as independent variables, such as product and service attributes and cultural identification.

The survey was designed with extreme care. We obtained approval from the Committee on the Use of Humans as Experimental Subjects (COUHES), followed sampling guidelines, assessed scale reliability and validity, and used simple, crisp, and unambiguous language.

About 170 people completed the survey. After data cleaning, we had 134 respondents. Five were living in
Japan, 129 in the United States. There were 81 U.S. citizens and 53 noncitizens.

After taking steps to assess construct reliability and validity, we conducted a regression analysis to identify statistically significant factors. Key findings were that Japanese products and services were generally perceived to excel U.S. products and services in all dimensions (although there are market segments that favor American products). In addition, attributes such as price, performance, and safety were found to be the key drivers of buying decisions (see Figure 2).

Our findings indicate that although Japanese products and services are considered slightly more expensive, they are also perceived to be better. Deeper analyses showed that perceptions vary by demographics.

Our team concluded that price, performance, and safety influence the initial decision to buy a product or service. However, once the decision to buy has been made, cultural effects come into play, dominating wherever there is a high “human touch.” Culture matters more in the airline and the hotel industries, for example, than in the automobile industry. Cosmopolitanism is a key element; the greater the degree of association with global culture, the greater the likelihood that a consumer will favor Japanese products and services.

Combining our analysis with informed judgment, our team recommended a strategy that capitalizes on the perceived strengths of Japanese products and services while addressing the needs of the global world. We recommended a primary focus on the “must have” attributes of price, performance, and safety with a secondary focus on “the more the better” attributes such as congruence with U.S. culture (an order winner for the American consumer).

Our team presented its results using systems engineering tools such as radar plots, Kano analysis, and multivariate graphs. Sharmila C. Chatterjee, visiting professor of marketing at MIT Sloan School of Management, served as our project advisor. Daniela Reichert, director of intern placements for MISTI Japan, supported the team operationally. We presented our findings at a workshop at the ANA headquarters in Tokyo. The workshop was attended by senior executives of the ANA strategic institute, managers, and several other employees. Overall, I am pleased to report that SDM tools and methods were useful at every phase of this project.

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