New Applications for Consumer Research

Economists Ink: A Brief Analysis of Policy and Litigation

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Carol Miu is an Empirical Methods Consultant. She recently received her MS in Marketing from the University of Maryland, and she holds an SB in Economics from MIT.

The tools of consumer research, which were originally developed for use in marketing, have many other applications in litigation and business consulting. With proper design and execution, surveys and experiments can shed light on a wide variety of important questions. Among the areas in which these tools may be valuable are the investigation of claims of false advertising, the consideration of possible trademark and brand infringement, antitrust market definition, and new product launch strategy.

When investigating possible false advertising, consumer research methods can be valuable in addressing issues of deception and materiality. Surveys and experiments can be employed to identify deception through the analysis of advertising interpretation, and to determine the materiality of deceptive advertising through analysis of consumer behavioral intentions. For example, researchers could conduct an experiment involving the following steps: 1) measure the product category preferences of each individual consumer participating in the experiment, 2) show half of the subjects the original advertisement with the alleged deceptive content, 3) show the other half of the subjects a ‘corrected’ advertisement that is identical to the original advertisement except that the alleged deceptive content has been removed, and 4) have the subjects answer questions that measure their understanding and perceptions of the advertisement and their behavioral intentions. Differences in the responses of the two groups of subjects could be attributed to the alleged deceptive content in the original advertisement.

Surveys and experiments can be useful when considering possible trademark or brand name infringement. Controlled experiments are useful in measuring brand confusion and estimating damages. Through recognition, recall, and elaboration exercises, researchers can evaluate the impact of trademark infringement and identify potential disproportionate effects on heterogeneous consumers. Assume that brand B is allegedly infringing on brand A’s trademark. An experiment could confirm or reject the existence of brand confusion and determine whether certain customer characteristics make brand confusion more or less likely. For example, the experiment may find that heavy category users are less likely to be affected by the trademark infringement than light category users, or that high education consumers are less affected than low education consumers. Determining which users are most likely to be affected by infringement may have important implications for the estimation of damages.

Consumer research can also aid in market definition. Researchers can design experiments and surveys to help define the product market and the geographic market. Experiments, such as conjoint analysis, can determine the extent to which specific products are substitutes, and surveys can give consumers the opportunity to list products that they consider similar to the focal product. In conjoint analysis, consumers are shown a series of cards, each listing the attributes of a particular product. Certain products are very similar, differing along only one dimension. Through a ranking task or a repeated choice exercise, consumers reveal their preference for the different product attributes. Conjoint analysis has also been used to estimate consumers’ reactions to changes in price. In that way, conjoit analysis can be used to estimate the price elasticity of demand for a product, which can be used in market definition.

Surveys also may be useful in market definition. Surveys can collect demographic information on customers, such as zip code, and the resulting data on the geographic distribution of stores’ customers can be used to define geographic markets. Such surveys may be particularly useful if stores do not collect individual customer data at the time of purchase. The importance of conducting statistically reliable surveys for the purpose of market definition is highlighted in FTC v. Whole Foods, in which the judge disregarded survey research due to potential biases from poor sampling methodology, questionnaire design, and response rate.

In formulating a new product launch strategy, the firm would like to gather information on consumers’ perceptions of the new product versus its competitors. Focus groups can be assembled to compare test versions of the new product with competing products. In later stages of product development, focus groups can supply the firm with valuable information on optimal launch timing and promotion strategy. If the product is at the concept stage, however, and no prototype is available, conjoint analysis can be used to determine the importance of different product attributes to consumers.

Surveys and experiments of consumer research collect both quantitative and qualitative data, and its techniques enable researchers to combine both types of data. For example, content analysis allows the researcher to statistically analyze qualitative data by assigning quantitative scores to the language used in open-ended answers. Content analysis software can identify and categorize the emotions and opinions expressed in written passages. Well-designed surveys and experiments can provide researchers with high-quality data that can be used in econometric models for purposes such as calculating damages and forecasting demand. Consumer research’s comprehensive approach to data can be useful in addressing a wide variety of difficult questions.