I4C helps you understand why
WRITER: Carole Lydon
ILLUSTRATOR: Peter Broelman
Buy or rent? Life support – on or off? Property or shares? Genetically modified beans or regular? These are all choices with a simple ‘yes’ or ‘no’ answer, but the gravity and consequences of each can be monumental.
In February this year, the UniSA Business School launched the Institute for Choice (I4C). Its simple title belies the complexity of its research and its potential to impact on society. At first glance, the concept of choice appears as routine as breathing in and out, but of course when we stop to think, this routine action is crucial to everyday life. We make hundreds of choices each day. Some of them will have a 5-minute impact and others will have lasting and serious repercussions. Strangely, some weighty decisions are made with cursory attention, while choosing between soy or dairy can lead to considerable Googling and texting friends.
Based in Sydney, Australia, the I4C brings together the world’s largest group of research experts in the field of choice modelling. Research Professor, Jordan Louviere, is joined by 17 staff in the Sydney office, an additional 30 affiliates throughout Australia, and over 20 affiliates based in the US and Europe.
So, what is choice modelling? It is the development of a system or process to predict the act of choosing between two or more possibilities. Within this, choice modelling builds a picture of how things are valued and the value trade-offs people are prepared to consider when making a choice.
The I4C works with partners to provide competitive advantage through a better understanding of how their customers and/or stakeholders make choices and how this feeds back into their own planning and decision-making. It offers insights into strategic growth, customer satisfaction, consumer and public opinion, measuring and predicting demand and trade-offs, willingness-to-pay, brand worth, brand equity, as well as quality of life and end of life decisions.
One of the reasons the I4C so effectively pushes the boundaries of choice modelling research is its openness to combining disciplines. At its core, choice modelling research uses the perspectives and expertise of many disciplines, including econometrics, mathematics/statistics, physics, marketing, management science and psychology. Specific research might invite expertise from the world’s brightest minds in that discipline. For example, one of the I4C’s thought leaders is Richard Carson, arguably one of the world’s leading environmental economists.
Louviere has been researching in this field for over 40 years and is adamant, “Choice modelling cannot push the boundaries of research without a multi-disciplinary approach. When people make decisions, they are considering every aspect of their life that will be affected by that decision. These are behaviourally complex moments in time, and it is our role to use as many perspectives as we can to research, model and advise our partners on the choices their stakeholders might make.”
Overwhelmingly, the I4C’s clients are looking for sophisticated solutions in the area of consumer choice to help find new ways to compete in the marketplace. However, choice modelling also has the capacity to offer tremendous insight and guidance for policy development. Several years ago members of the I4C team were engaged by the United Kingdom Ministry of Justice to develop a new way to understand the public’s sentencing preferences for various types of crime.
Louviere explains, “A crime sentence is comprised of a series of factors – prison time, rehabilitation, compensation to victims, etc. Any sentence can be viewed as some combination of those factors. When you start to ask the public to evaluate these combinations, the question becomes, ‘What is the optimum combination and what are you willing to pay in terms of increases or decreases in taxes?’ Here you can see the value trade-offs in action.”
One current project that combines market, trade and the environment isPathways to Market which has been partly funded by the Australian Research Council Industrial Transformation Hub Scheme. The I4C is a project partner with the University of Tasmania SenseT program on this $10.1 million international research collaboration. The project will have significant implications for the production, process and distribution of food throughout the world.
Acknowledging that consumers are becoming more demanding about the provenance and safety of their food, Pathways to Market will collect real-time data over five years about the conditions under which food is produced, processed, transported, stored and sold. This data will be collected through sensors in the food packaging of products from two project collaborators. Researchers from the I4C will use choice experiments, real market simulation and field surveys to understand consumer reaction to the sensor technology and how it influences their purchasing behaviour.
“This is an immensely important supply chain. The outcomes of this project have the potential to influence global food security and safety,” says Louviere, “And because this project looks at the supply of food from its very source, it can help to recalibrate how we value the environment. It has the potential to create a new environmental bottom line for accounting in the food supply industry.”
The choices we make are based on the values we have. As much as we would like to believe that our values remain steadfast, the truth is we make trade-offs daily. Do we trade-off differently on our own compared to when we are part of a group? Do we choose differently on boards and committees than we do individually? If choice modelling wasn’t complex enough, group decision-making takes us into new territory. These are the research boundaries which the I4C continues to push.
The I4C’s latest breakthrough will definitely shed some light on business decisions. It has now developed the capability to model individual human beings. Up until this point, research methods have only allowed predictions about a population rather than an individual. This new research opens up the possibility of addressing thousands of specific business to business problems.
This is just the beginning.
Professor Jordan Louviere is a Research Professor with the Institute for Choice (I4C) at the UniSA Business School.
> For more information, visit the Institute for Choice website