price effciency market
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International Journal of Market Research Vol. 51 Issue 3
Exploring the price efficiency within
automotive marketsAn application of data envelopment analysis
Pingjun JiangLa Salle University
Using.a.non-parametric.data.envelopment.analysis.(DEA).approach,.this.paper.
compares.the.price.of.each.car.model.in.a.segment.of.the.personal.car.market.
with.the.best.possible.price.in.view.of.the.technology.available.given.its.particular.
combination.of.characteristics.In.this.approach,.a.car.model.is.defined.as price
efficient.if.it.offers.customers.the.highest.value.per.dollar.spent.for.that.set.of.
characteristics.Likewise,.a.car.model.is.inefficient.if.there.is.some.other.car.model.
with.a.lower.price.having.equivalent.or.higher.quality,.whereby.a.measure.of.the.
price.efficiency.is.determined.by.the.price.reduction.needed.to.make.a.car.model.
efficient.The.data.set.covers.141.different.year.2002.car.models,.as.appeared.in.
Consumer Reports. magazine.The. vehicles.that.are. listed. by. Edmundscom.as.
consumers.most.wanted.are.compared.with.those.at.the.top.of.our.efficiency.list.It.is.found.that.the.majority.of.cars.at.the.top.of.our.list.are.also.listed.as.
most.wanted.by.Edmundscom.Evidently,.consumers.who.usually.make.decisions.
based.on.price.and.quality.information.will.naturally.employ.a.heuristic.such.as.
buy.car.models.at.the.top.of.price.efficiency.list.if.this.list.is.made.available.to.
them
Introduction
There.has.been.considerable.change.in.the.automotive.industry.Product.life. cycles. have. shortened,. internal. competition. has. increased. and.competition. has. become. a. worldwide. phenomenon. The. product. is.becoming. increasingly. important. and. strategic. in. corporate. marketing.mixes. in. this. new. context;. therefore,. the. product. development. process.ensures.that.car.models.perceived.of.higher.value.will.fulfil.the.needs.of.the.highest.possible.number.of.customers.more.satisfactorily.and.rapidly.
Received.(in.revised.form):.14.August.2007
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Car.manufacturers. are. required. to. address. increasingly. specific.market.needs.while.still.providing.value,.in.order.to.ensure.success.and.thereby.
maintain.or.improve.their.position.with.regard.to.competitors.Substantial.price.dispersion.has.been.found.or.implied.in.a.large.number.of.studies.in.actual.retail.automotive.markets.(examples.are.Benham.1972;.Pratt. et al.1979;.Maynes.&.Assum.1982;.Dahlby.&.West.1986;.Shugan.1988).For.the.simple.reason.that.consumers.are.assumed.to.maximise.their.utility,.this. is. strong. evidence. that. consumers. are. less. than. perfectly. informed.about. the. alternatives. that. are. available. in. consumer. markets. (see,. for.example,.Oxenfeldt. 1950;.Bettman.1979;.Beals.et al.1981;.Maynes.&.Assum.1982)
The. literature. indicates. several. reasons. why. consumers. may. make.choices. without. being. fully. informed. The. consumer. is. faced. with. the.non-availability.of.desired. information. (Feldman.&.Spencer. 1965). and.the. cost. of. time. needed. to. acquire. information. (Mitchell. &. Sorenson.1986;. Ratchford. &. Gupta. 1987). There. are. limitations. of. processing.capacity. (Bettman. 1979;. Beals. et al. 1981). culminating. in. consumers.insufficient. capability. to.understand. all. available. information. (Sepstrup.1978). Especially. in. automotive. markets,. technical. complexity. and. the.multi-component.nature.of.products.(Maynes.&.Assum.1982).potentially.
affect.price.dispersionThat. consumers. make. purchase. decisions. based. on.maximising. their.utility.function.with.imperfect.information.raises.some.obvious.questions.How.are.the.car.models.positioned.in.the.market.in.terms.of.providing.consumers. a. set. of. utilities. at.a. certain. price?.How.does. such. position.relate.to.its.market.performance.(eg.sales)?To. address. these. questions,. the. utility. derived. from. personal. cars.might.be.an.interesting.area.in.which.to.perform.consumption.efficiency.analysis. to. examine.which. cars. satisfy. a. consumers. needs,. given. their.
respective.costs.The.critical.point.behind.consumption.efficiency.is.then.how.to.identify.and.measure.these.needs.Before.one.can.conclude.that.consumers.do.not.reach.their.consumption.frontier.with.the.amount.of.money.they.spend,.ie.they.are.inefficient.in.their.consumption.bundle,.the.consumption.frontier.must.be.objectively.defined.Obviously,.summation.over. utilities. for. different. consumers. is. not. objectively. measured. as. is.summation.over.production.from.different.plantsStudies. in. production,. such. as. that. by. Womack. et al.. (1990),. are.typically.directed.to.analysts.and.potential.car.owners.as.well,.and.indicate.that.consumers.should.purchase.car.models.that.are.cheaper,.have.lower.variable.and.service.costs,.have.a.longer.life.and.higher.performance.than.
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cars.made.by.a. different. production. technology.Many. car. owners,. car.magazines,.journalists.and.experts.(eg.Consumer Reports,.Annual.Auto.
Issue,.2002,..and.JD.Power.Associates,.wwwjdpowercom).seem.to.agree.with.that.Various.marketing.investigations.among.car.owners.show.that.some.car.models.perform.better.in.many.respects.than.the.others.The.tests.from.car.magazines,.though,.are.rather.subjective.and.reflect.the.drivers.personal. evaluation. of. the. tested. car. In. addition,. cars. are. often. tested.against.each.other,.without.investigating.whether.both.cars.are.inefficient.Furthermore,.such.tests.do.not.quantify.how.efficient.the.recommended.car.model.is.or.how.inefficient.the.non-recommended.one.is
The.purpose.of.this.study.is.to.examine.if.and.to.what.extent.some.car.
models/makes.are.superior.and,.more.importantly,.whether.such.superiority.are.turned.into.larger.sales.The.results.of.this.study.are.valuable.not.only.to.consumers. but. also. to.producers. For. instance,. are. consumers.most.wanted. cars. also. the. most. efficient. car. models?. Alternatively,. are. the.least.efficient.car.models.the.consumers.least.wanted?.This.study.intends.to.provide. consumers.with. advice. to.avoid.certain. car.models. as.being.inefficient.for.one.or.more.reasons,.and.by.doing.so.increase.consumer.welfare.The.study.may.further.inform.an.automotive.producer.whether.its.competitors.presumptive.model.is.superior.to.its.own.and.in.that.case.
what.substantial.improvements.are.required.in.order.to.turn.its.inefficient.car.into.an.efficient.one.The.method.applied.to.evaluate.this.is.the.data.envelopment.analysis.(DEA).approach,.using.economic.and.technical.data.for.141.different.models.in.2002,.from.Consumer Reports
This.paper.is.organised.as.follows.A.simple.presentation.of.the.DEA.approach. and. its. input-orientated. formalisation. is. provided. Next,. car.models.are.evaluated.and.the.main.findings.summarised.Finally,.a.general.sales.model.with.some.additional.criteria.is.provided.and.discussed,.and.the.conclusions.and.managerial.implications.summarised
Methodology
A simple DEA approach
This. study. adopts. Kamakura. et als. (1988).methodology. paradigm. in.terms. of. defining. and. measuring. market. efficiency. Kamakura. et al.employ. a.DEA. for.measuring. the. degree. of. inefficiency. of. each. brand.within.a.product.category.They.define.the.measure.of.price.efficiency.in.the. characteristics-space. According. to. them,. this. measurement. allows.comparison.of.the.price.of.each.brand.with.the.best.possible.price.under.the.
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technology.available.at.its.particular.combination.of.characteristics.It.also.allows.the.identification.of.a.set.of.efficient.brands.used.as.the.standard.of.
comparison.Finally,.this.measurement.provides.some.instructions.on.how.to.make.a.brand.price-efficient.Using.Kamakura. et als.approach,.a.brand.can.be.defined.as.efficient.if.it.provides.the.highest.value.per.dollar.spent.for.that.set.of.characteristics.where.an.efficient.brand.would.be.assigned.a.value.of.1.on.a.price-efficiency.scale.Efficiency.of.any.particular.brand.is.measured.as.the.ratio.between.the.efficient.price.and.the.actual.price.paid
A.potentially.useful.application.of.Kamakura.et als.study.might.involve.providing. lists. of. inefficient. brands. or. providing. price. ranges. in. which.
inefficient.brands.would.be.efficient.Such.information.would.potentially.be.useful.to.a.consumer.We.apply.the.methodology.set.forth.in.Kamakura.et als.study.to.a.number.of.car.models.in.automotive.markets
Let.us.return.to.economics.and.work.with.measured.costs.and.benefits.Consider. a. rational. consumer. who. pays. an. amount. of. money,.p,. to.purchase. and. drive. a. car,. y.In.fact,.in.purchasing.a.car,. y,.one.buys.a.bundle.of.technical.characteristics,.t,.such.as.space,.weight,.engine.power,.etc,. which. provide. the. owner. with. a. utility.Uy(p, t). We. consider.p.as.the.economic.or.price.variable.Obviously,.the.first.partial.derivative.with.
respect.to.p.is.negative.(the.more.expensive.a.car,.the.less.utility.it.yields).and. with. respect. to. t. is. positive. (the. higher. the. technical. performance,.the. higher. the. utility).For.a. given.utility.level. derived.from. a.car,.y,.we.obtain.that.d
t/d
p.=.y
p/y
t,.ie.the.rate.at.which.the.car.buyer.is.willing.to.
substitute.technical.performance.for.costs.equals.the.ratio.of.derivatives.of.the.utility.function.It.is.assumed.that.d
t/d
p.>.0,.ie.indifference.curves.
between.costs.and.technical.performance.have.a.positive.slope,.if.the.lower.utility.from.higher.costs.is.compensated.by.the.higher.utility.from.higher.performance
Fare. and. Grosskopf. (1994),. among. others,. have. formalised. input-orientated.DEA.models.A.detailed.description.of.a.DEA.model.can.be.found.in.Banker.and.Morey.(1986).They.extended.the.original.model.to.empirical.data.involving.ordinal.or.nominal.characteristics.This.extension.was.incorporated.into.Kamakura.et als.study,.as.well.as.ours.We.will.not.present.the. detailed.procedures.on. how. the. DEA. model.is. applied.This.study. determines. the. efficiency. by. mathematically. solving. the. following.problem.(adapted.from.Banker.et al.1984)
(Max)Z s skh s s
r i
i
m
r
g
j r i, , + +
+
== 11 . (1)
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subject.to:
p z p h srk k rj
j
n
j r + =
=
+1
0 . (r.=.1,.2,.,.g). (2)
x h s xij
j
n
j i ik
=
+ =1
. (i.=.1,.2,.,.m). (3)
==
11j
n
. (4)
h s sj r i
, ,+ 0 . (j.=.1,.2,.,.n). (5)
where. n. is. the. number. of. car. models. for. each. category,.m.the.number.of. inputs,.g. the. number. of. outputs,. x
ij.the.level.of. i-type. input. for. car.
model.j,.prj
. the. level. of. r-type. output. (car. characteristic). for. car. model.j,.Z
k. is.the.efficiency.ratio.for. the. car. model.under. consideration,..is.a.
very.small.constant,.sr
+.and.si.are.slack.variables.for.output. r.and.input.
i,.and.hj.is.the.weight.for.car.model.j.The.slacks.measure,.in.addition.to.
the.price.reduction,.how.many.more.of.the.attributes.should.be.offered.by.
the.inefficient.car.models.to.make.them.efficient.(Kamakura.et al.1988).According.to.these.models,.the.objective.is.to.reduce.the.eventual.slack.in.inputs.(costs).without.reducing.the.optimal.output.(technical.performance).If,. for. instance,. the. input. slack. is. equal. to. unity,. the. observed. car. is.efficient.If,.on.the.other.hand,.the.input.slack.is.less.than.unity,.the.car.under.investigation.is.inefficient.A.computer.program.is.utilised.to.solve.the.above.DEA.models.for.each.of.the.nine.car.categories
Given.these.quality.indexes,.we.employ.the.same.definition.of.efficiency.as. employed. by. Hjorth-Anderson. (1984). and. Kamakura. et al. (1988).
Hence,.a.car.model.is.inefficient.if. there.is.some.other.car.model.with.a.lower.price.having. equivalent. or.higher. quality,. and. the. price.reduction.needed.to.render.the.chosen.car.model.efficient.provides.a.measure.of.the.loss.incurred.by.choosing.an.inefficient.car.model
Determinant attributes
Cars.are.extremely.differentiated.products.If.producers.intend.to.satisfy.the.consumers.preferences,.they.have.to.offer.many.possibilities.of.choice.The.entire.spectrum.of.factors.or.characteristics.can.be.very.large,.covering.space,. motor. power,. safety,. price,. reliability,. dimensions,. and. so. on.
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Obviously,.in.order.to.evaluate.the.efficiency.of.a.particular.car,.all.these.characteristics.should.be.taken.into.account.The.problem.that.a.car.buyer.
faces,. however,. is. that. some. of. these. factors. (such. as. driving. features,.design,. safety,. reliance). are. not. objectively.measured. A.car. buyer.must.rely.either.on.car.manufacturers.who.claim.that.their.models.are.superior.to. those.of. their.competitors,. on.professional. car. magazines,.or.on. the.objective.and.measurable.characteristics
All.determinant.attributes.need.to.be.included.in.the.DEA.study.because.the.efficiency.calculation.depends.on.the.assumption.that.utility.is.estimated.correctly.A.buyer.may.not.have.sufficiently.good.information.on.some.of.these.attributes.that.are.in.the.DEA.calculation.to.make.comparisons.of.
the. attractiveness.of. the. bought.model.with. its. competitors. models. In.addition,.a.list.of.attributes,.which.could.be.assigned.to.each.competing.model,. is. developed. independently. of. the. buyers. knowledge. These.attributes.need.to.capture.salient.dimensions.as.well.as.possible
Gupta. and. Ratchford. (1992). uncovered. five. dimensions. from. a. set.of. concrete. attributes. that. determine. a. consumers. choice. of. selecting.car. models. Starting. from. their. perceptual. constructs,. we. compile. a.corresponding.list.of.attributes.that.are.available.for.each.car.model.in.our.data.set.In.particular,.an.exhaustive.list.of.ratings.of.each.of.the.141.cars.
in.the.study.on.attributes.available.in.Consumer Reports.was.assembled.Eliminating. all. attributes. in. the. Consumer Reports. data. that. were. not.significantly. related. to. at. least. one. perceptual. dimension. developed. by.Gupta.and. Ratchford. (1992),. and. eliminating. redundant. attributes,. led.to.a.list.of.ten.attributes.for.which.objective.data.were.readily.available,.and. which. were. significantly. related. to. one. or. more. of. the. perceptual.constructs
A. problem. is. that. these. ten. attributes. may. not. adequately. capture.differences. in. quality,. performance. and. style,. which. were. identified. as.
important. attributes. by. Gupta. and. Ratchford. (1992). Unfortunately.there. is.no.clean.objective. analogue.of. these.attributes. However,. since.they. may. be. an. important. influence. on. consumer. choice,. a. reasonable.measure.of.these.attributes.for.each.of.the.141.car.models.identified.in.this. study.was.required. Our. solution.was.to.establish. attribute.ratings.utilising.studies.published.by.JD.Power.and.Associates.The.automobile.consumer. satisfaction. ratings. given. by. JD. Power. and. Associates. are.based.on.surveys.of.actual.automobile.owners,.and.cover.issues.such.as.owner-reported.problems.with.the.vehicle.and.measures.of.a.consumers.satisfaction.with.particular.characteristics.of.the.vehicle
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In. general,. the. attributes. used. as. the. basis. for. our. analysis. do. a.reasonable. job. of. capturing. variation. in. the. perceptual. attributes. that.
consumers.appear.most.likely.to.use.in.differentiating.among.car.models.The. attributes. considered. in. this. study. were. those. listed. by.ConsumerReports.and.JD.Powers.website.(as.shown.in.Table.1)The.first.ten.attributes.are.objective.measures.The.rest.of.the.attributes.
are.subjective.ratings.on.a.5-point.scale.These.16.attributes.(ten.objective.attributes.plus.ratings.of.six.variables.including.comfort.and.styling).were.used.to.capture.most.of.the.variation.in.the.major.perceptual.constructs.identified.by.Gupta.and.Ratchford.(1992),.and.we.have.some.confidence.in.assuming.that.they.are.capturing.the.major.dimensions.used.by.consumers.
in.buying.automobilesThe. choice. of. these.variables.was. not.made.arbitrarily. In. fact,.none.
of. the. relevant. technical. performance. characteristics. published. in. the.magazine. was. left. out. In. addition,. this. study. includes. a. measure. of.safety,.given.that.data.on.airbags.are.available.This.study.is.based.not.only.on.many.measurable.characteristics.always.used.in.car.tests.but.also.the. selected. parameters. covering. a. large. part. of. all. possible. subjective.parameters.that.consumers.consider.when.they.decide.to.purchase.a.new.car.Many.car.owners.(and.potential.buyers.as.well).are.driven.by.such.
soft.or.non-measurable.parameters.Therefore,.the.selected.performance.parameters.are.rather.comprehensive.in.this.study.The.price.characteristic.is.the.only.characteristic.that.is.treated.as.an.economic.parameter.(input.
Table 1 Automobile characteristics
Source Characteristics
Consumer Reports 1. Horse power
2. Seating (number of seats)
3. Length (inches)
4. Width (inches)
5. Weight
6. Drive wheel
7. Safety belt
8. Airbags (head); airbags (side)
9. ABS
10. Traction aid
J.D. Power and Associates 11. Mechanical quality
12. Body and interior quality
13. Reliability
14. Feature and accessory quality
15. Performance (including acceleration and handling stability)
16. Style
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variable).and.therefore.minimised.instead.of.maximised.However,.as.was.mentioned.at.the.beginning.of.the.paper,.these.characteristics.cover.by.no.
means.all.the.possible.parameters.a.car.owner.had.in.mind.before.making.a.purchase.decision
The data set
We.now.apply.the.methodology.to.this.complex.automotive.product.class,.which.involves.a.large.number.of.continuous.and.ordinal.attributes,.and.a.large.number.of.makes.and.models.A.total.of.141.different.car.models.in. 2002. were. selected. from. Consumer Reports. magazine,. April. 2003.
The.models.are.classified.into.nine.groups.by.car.type:.family.cars,.small.cars,.large.cars,.luxury.cars,.upscale.cars,.minivan,.sporty.cars,.SUVs.and.trucks.Technical.performance.criteria.and.detailed.economic.data.(such.as.price.and.engine.power).exist.for.these.car.models.In.the.sample,.there.are.73.car.models.made.in.the.US,.3.made.in.Korea,.45.made.in.Japan.and.20.made.in.Europe.Although.it.was.intended.to.balance.the.number.of.car.models.among.all.the.countries,.the.data.availability.mentioned.above.led.to.over-representation.of.American.cars
Analyses (two-step decision making)
From. a.productmarket. point. of. view,. a.marketplace. in. the. eye.of. the.consumer. represents. the. realistic. market. structure. Consumers. with.different.decision-making.processes.have.different.perceptions.of.current.market. structure,. and. these. perceptual. differences. will. cause. them. to.position.car.models.in.their.consideration.set.in.a.different.way
Some.consumers.put.all.the.available.car.models.into.their.consideration.sets. when. shopping. for. a. car;. in. this. sense. they. implement. a. one-step.
decision-making.process.However,.many.consumers.perform.two.separate.steps.in.buying.a.car:.first,.they.decide.which.type.of.car.they.want.to.buy;.then.they.form.their.consideration.set.by.including.only.the.car.models.within.the.car.type.of.their.choice.For.instance,.a.consumer.may.decide.to.buy.a.luxury.car.and.then.look.up.the.car.models.in.the.class.that.s/he.has.chosen.Since.the.majority.of.consumers.adopt.a.two-step.analysis,.an.efficiency.map.of.the.automotive.market.developed.from.such.a.basis.is.more.realistic.Therefore,.we.will.calculate.the.efficiency.scores.only.with.respect.to.two-step.decision.making.and.study.the.results.The.efficiency.scores.will.be.termed.as.two-step.decision.making.The.firm.that.does.not.understand. the. impact.of.the. consumer.decision-making.process.on.
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its.brand/model.positioning/repositioning.is.likely.to.miss.opportunities.to.capture.new.competitive.advantages.because.of.market.structure.changes.
brought.about.by.competitorsIn. order. to. calculate. efficiency. under. the. two-step. decision-making.
process,.the.relevant.choice.set.had.to.be.defined.Since.consumers.should.be.able.to.readily.classify.cars.into.general.types.simply.by.looking.at.them,.it.was.felt.reasonable.to.assume.that.consumers.make.an.optimal.choice.of. type.of.car. (eg. family. vs. luxury),.and. that. the. relevant.alternatives.for.calculation.of.efficiency.are.other.car.models.within.the.chosen.type.That.is,.we.assume.that.a.consumer.can.readily.tell.the.difference.between.general.types.of.cars,.but.cannot.tell.which.model.within.a.type.is.best.
without.more.extensive.search.Accordingly,.the.models.that.we.employ.in.our.efficiency.calculations.are.other.models.in.the.general.class.in.which.the. consumer. made. his. or. her. choice. We. employed. the. classification.scheme. used. by. Consumer Reports. . the. magazine. that. publishes. car.model. ratings. . in. classifying. each. of.the. 141.models. into.one.of.nine.classes.As.mentioned.above,.these.are.family.cars,.small.cars,.large.cars,.luxury.cars,.upscale.cars,.minivan,.sporty.cars,.SUVs.and.trucksFor.car.models.that.were.estimated.to.be.lower.in.quality.but.higher.in.
price.than.at.least.one.other.alternative,.efficiencies.were.calculated.as.in.
equations.(1)(5).of.the.DEA.model.presented.above.The.results,.which.were.calculated. for.quality.scales. constructed.according. to.the. two-step.decision-making.process.outlined.above,.are.presented.for.each.car.model/make.in.Tables.25
Efficiency estimates
Results
As.discussed.earlier,.the.measures.of.efficiency.under.the.two-step.decision-making.process.were.obtained.A.summary.of.the.DEA.results.is.presented.in.Tables.25.The.tables.show.the.economic.and.technical.performance.inefficiency.All. nine.groups.by.car. type.have.been. tested. separately. for.constant.returns.to.performance.(CRP),.ie.the.lower.performance.level.is.derived.from.the.cheaper.cars,.while.the.higher.performance.is.derived.from.the.expensive.cars.Table.2.consists.of.all.efficient.car.models.and.their.corresponding.prices.Table.3.displays.the.inefficient.models.classified.according.to.the.highest.price.efficiency.obtained.by.the.CRP.frontier.A.summary.of.efficiency.estimates.by.car.group.and.by.country.is.presented.
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Group I: Family carsChevrolet Impala 19,960Chevrolet Malibu 17,535Dodge Stratus 17,400Ford Taurus 18,815Honda Accord 15,500Hyundai Sonata 15,499Mercury Sable 19,820Oldsmobile Alero 17,640Pontiac Grand Am 16,800Saturn L-Series 16,370Legacy/Outback 19,295
Toyota Camry 18,970Volkswagen Passat 21,750
Group II: LuxuryAcura RL 43,150Audi A6/Allroad 35,400BMW 5-Series 35,950Cadillac DeVille 42,590Lexus GS300/GS430 38,605Lincoln Continental 38,185Lincoln Town Car 40,170Mercedes-Benz E-Class 48,450
Group III: Sporty carsAudi TT 31,200Chevrolet Camaro 18,285Ford Escape 18,415Ford Mustang 17,365Mazda MX-5 Miata 21,180Mercury Cougar 16,520Pontiac Firebird 19,920
Toyota Celica 17,085
Group IV: SUVsBMW X5 38,900Chevrolet Blazer 19,475Chevrolet Tracker 15,865Dodge Durango 25,100Ford Excursion 35,110Hyundai Sante Fe 17,199Isuzu Rodeo/Sport 16,100Jeep Grand Cherokee 25,425Jeep Wrangler 15,230Mazda Tribute 18,155Mercedes-Benz M-Class 36,300Mitsubishi Montero Sport 22,777Nissan Xterra 17,999Pontiac Aztek 19,995Subaru Forester 20,295Suzuki Vitara/XL-7 15,599
Toyota 4Runner 26,335
Group IV: SUVs (continued)Toyota Highlander 23,880Toyota RAV4 16,525
Group V: TrucksChevrolet S-10 13,742Chevrolet Silverado 1500 17,518Ford Ranger 12,330GMC Sierra 1500 17,408Mazda B-Series 12,840Nissan Frontier 12,799
Toyota Tacoma 11,900Toyota Tundra 15,605
Group VI: MinivansChevrolet Astro 23,920Chevrolet Venture 21,380Chrysler Voyager 16,355Dodge Caravan/Grand 16,355Ford Windstar 22,340GMC Safari 23,920Honda Odyssey 24,250Mazda MPV 22,250Mercury Villager 19,340
Toyota Sienna 23,905
Group VII: Small carsChrysler PT Cruiser 16,275Dodge Neon 12,315Ford Focus 12,470Hyundai Elantra 12,499Nissan Sentra 11,799Saturn S-Series 10,570Subaru Impreza 17,495
Toyota Echo 9,995Volkswagen Golf 15,050Volkswagen Jetta 16,850Volkswagen New Beetle 15,900
Group VIII: Upscale carsBMW 3-Series 27,100Chrysler 300M 28,415Infiniti I35 28,750Lexus ES300 31,505Lexus IS300 29,435Mazda Millenia 28,075Mercedes-Benz C-Class 24,950
Group XI: Large carsBuick LeSabre 24,495Chrysler Concorde 22,510Ford Crown Victoria 22,930Pontiac Bonneville 25,700
Toyota Avalon 25,845
Table 2 Efficient models classified by price (in US$)
Price Price
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in.Table.4.All.car.makes.are.classified.(again.based.on.average.efficiency).and.presented.in.Table.5
The.results.in.Table.4.indicate.that,.under.the.two-step.decision-making.process,.in.terms.of.car.type,.the.truck.sub-market.has.average.efficiency.of.09901,.with.667%.of.the.tested.trucks.being.efficient.The.minivan.sub-market. follows,. having. a. slightly. lower. efficiency. at. 09747,. with.
Group I: Family cars
Mazda 626 0.8273
Infiniti G20 0.8505
Dodge Intrepid 0.8616
Nissan Maxima 0.8855
Oldsmobile Intrigue 0.9116
Mitsubishi Galant 0.9164
Volvo S40/V40 0.9197
Pontiac Grand Prix 0.9201
Buick Regal 0.9467
Buick Century 0.9494
Chrysler Sebring 0.9522
Group II: Luxury
Mercedes-Benz S-Class 0.6716
Lexus LS430 0.9788
Cadillac Seville 0.9801
Jaguar S-Type 0.9917
Group III: Sporty cars
Porsche Boxster 0.5784
Mercedes-Benz SLK 0.5829
Chevrolet Corvette 0.7087
BMW Z3 0.7244
Honda S2000 0.7272
Group IV: SUVs
Toyota Land Cruiser 0.5363
Acura MDX 0.7069
Infiniti QX4 0.7306
Isuzu Trooper 0.7739
Lexus RX300 0.7840
GMC Yukon 0.8949
Toyota Sequoia 0.9796
Nissan Pathfinder 0.9865
Group IV: SUVs (continued)
Chevrolet Suburban 0.9139
Chevrolet Tahoe 0.9907
Group V: Trucks
Ford Explorer Sport Trac 0.8966
GMC Sonoma 0.9911
Ford F-150 0.9944
Dodge Dakota 0.9995
Group VI: Minivans
Oldsmobile Silhouette 0.8160Pontiac Montana 0.9009
Chrysler Town & Country 0.9500
Nissan Quest 0.9795
Group VII: Small cars
Mercedes-Benz CLK 0.4991
Toyota Prius 0.8253
Pontiac Sunfire 0.9050
Honda Civic 0.9147
Mazda Protg 0.9549
Chevrolet Monte Carlo 0.9894
Chevrolet Cavalier 0.9955
Group VIII: Upscale cars
Volvo S80 0.7912
Saab 9-5 0.8546
Lincoln LS 0.8729
Oldsmobile Aurora 0.9509
Saab 9-3 0.9531
Group XI: Large cars
Buick Park Ave 0.7510
Mercury Grand Marquis 0.9626
Table 3 Inefficient cars classified according to price efficiency estimated by CRP* frontier
CRP CRP
* CRP: constant return to performance, the producers are able to linearly scale the inputs and outputs
without increasing or decreasing efficiency.
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Table 4 Summary of efficiency estimates
Subgroup Efficientcars/totalcarstested Averageefficiencydegreeofallcars
Family car 13/24 = 0.5417 0.9559Luxury car 8/12 = 0.6667 0.9685Sports/sporty 11/18 = 0.6111 0.9015SUV 16/24 = 0.6667 0.9330
Truck 8/12 = 0.6667 0.9901Minivan 10/14 = 0.7143 0.9747Small car 11/18 = 0.6111 0.9491Upscale 7/12 = 0.5833 0.9519Large car 5/7 = 0.7143 0.9591
European 12/20 = 0.60 0.8879Japanese 28/45 = 0.6222 0.9413Korean 3/3 = 1.0 1.0000US 46/73 = 0.6301 0.9700
Total 89/141 = 0.6312 0.9499 (std dev. = 0.1020)
Table 5 Summary of all manufacturers based on CRP frontier efficiency estimates
Manufacturer Testedcars Efficientcars(CRP) AverageefficiencyforCRP
Acura 2 1 0.8535
Audi 2 2 1.0000BMW 4 3 0.9311Buick 4 1 0.9118
Cadillac 2 1 0.9900Chevrolet 14 9 0.9713Chrysler 6 4 0.9837Dodge 6 4 0.9769Ford 10 8 0.9891GMC 4 2 0.9715Honda 4 2 0.9105Hyundai 3 3 1.0000Infiniti 3 1 0.8604Isuzu 2 1 0.8870Jaguar 1 0 0.9917Jeep 2 2 1.0000Lexus 5 3 0.9526Lincoln 3 2 0.9576
Mazda 7 5 0.9689Mercedes-Benz 6 3 0.7923Mercury 4 3 0.9907Mitsubishi 2 1 0.7297Nissan 6 3 0.9753Oldsmobile 4 1 0.9196Pontiac 7 4 0.9609Porsche 1 0 0.5784Saab 2 0 0.9039Saturn 2 2 1.0000Subaru 1 1 1.0000Suzuki Vitara/XL-7 1 1 1.0000
Toyota 13 10 0.9493Volkswagen 4 4 1.0000Volvo 2 0 0.8555
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7143%.of.its.tested.cars.efficient.The.large.and.upscale.sub-markets.performed.similarly,.with.efficiencies.of.09591.and.09519.respectively;.
and,. respectively,. 7143%. and. 5833%. of. the. tested. cars. in. these. two.categories. are. efficient. While. estimated. mean. efficiency. is. lowest. for.sports.cars.(09015),.this.is.also.the.type.most.likely.to.have.attributes.not.well.captured.in.our.data.(eg.sportiness);.consequently,.the.estimates.in.this.category.should.be.treated.with.some.cautionEfficiencies.will.tend.to.be.lower.for.categories.having.a.larger.number.
of.alternatives.because.the.cost.of.acquiring.and.retaining.the.information.on.these.will.be.greater:.after.a.point,.it.will.be.more.cost-effective.to.risk.losses.rather.than.to.seek.more.information.We.measure.the.number.of.
alternatives.as.the.number.of.models.in.the.class.in.which.the.consumers.choice.occurred.(car.models.in.a.category).The.correlation.between.these.two.is.0466,.a.negative.correlation,.significant.at.alpha.=.005.By.our.definition,. inefficiency. is. the. price.reduction. that. a. consumer.could.get.from.choosing.some.lower-priced.model.of.equal.utility.Since.the.expected.price. differential. between. the. chosen. model. and. the. better. alternative.increases.with.the.dispersion.of.prices.in.that.category,.inefficiency.should.increase. (or. efficiency. should. decrease). with. the. dispersion. of.prices. in.the. category.We.measure. price.dispersion. as. the. standard.deviation.of.
prices. in.the. class. in.which.the. consumers. choice. occurred.(std. dev.of.prices).The.correlation.between.these.two.is.0518,.a.significant.negative.relationship.at.alpha.=.005If.one.is.interested.in.the.most.frequent.efficient.cars.with.which.the.
method.chose.to.compare.the.inefficient.cars,.the.models.shown.in.Table.6.dominate.in.respective.car.groupsHowever,.it.is.not.clear.if.these.cars.appear.frequently.because.they.are.
super-efficient,.or.if.they.are.chosen.to.project.the.inefficient.cars.because.they. happen. to. lie. near. the. majority. of. inefficient. cars. For. instance,.
a. Mercedes-Benz. C-Class. customer. will. be. satisfied. with. the. distinct.characteristics.of.his/her.efficient.car,.without.bothering.if.this.model.is.regarded.as. an. alternative. model. to,. say,. the. inefficient.BMW. 5-series.Finally,.there.are.six.car.makes.that.share.first.place.as.far.as.the.total.number. of. efficient.models. among.the. tested. is.concerned:. the.German.Audi,.with. two.out.of. two.models;. the.American. Jeep.with. two.out.of.two;.the.Korean.Hyundai.with.three.out.of.three;.the.American.Saturn.with.two.out.of.two;.Subaru.with.three.out.of.three;.and.Volkswagen.with.four.out.of.fourThe. results. in.Table.4.also. indicate.the.average.performance.in.terms.
of.efficiency.among.the.four.countries.As.expected,.under.the.two-step.
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decision-making.process,.the.lowest.efficiency.in.terms.of.CRP.is.obtained.for.the.European.cars.(08879,.with.60%.of.its.tested.car.models.efficient),.
and. the. highest. for. the.Korean. cars. (1000,.with. 1000%. of. its. tested.car.models.efficient).On.the.other.hand,.there.are.significant.differences.between.the.European.(as.above).and.US.efficiency.scores.(09700,.with.6301%.of.tested.car.models.efficient).The.Japanese.efficiency.(09413,.with.6222%.of.its.tested.car.models.efficient).is.higher.for.the.CRP.than.the.efficiency.of.the.European.cars.The.US.car.efficiency.is.higher.than.that.of.the.Japanese.carsIn. Table. 4,. the. mean. efficiency. of. all. year. 2002. car. models. in. the.
automotive.market.under.the.two-step.decision-making.process.is.09499,.
with. 6312%. of. the. tested. car.models. being. efficient. In. particular,. as.shown.in.Table.5,.mean.efficiency.by.car.make.ranges.from.05784.for.Porsche.(ie.an.average.price.reduction.of.4216%.is.needed.to.render.this.make.efficient).to.10.(Audi,.Hyundai,.Jeep,.Saturn,.Subaru,.Suzuki.and.Volkswagen).Mean.efficiency.lies.between.090.and.10.in.26.car.makes,.085.to.090.in.four.makes,.070.to.085.in.two.car.makes,.and.less.than.070.in.one.car.make.The.most.efficient.car.makes.are.Audi,.Jeep,.Saab,.Subaru,.Saturn,.Nissan,.Hyundai,.Ford,.Volkswagen,.Mercury.and.Dodge.The. least.efficient. car.makes.are. Porsche,.Mitsubishi,.Volvo,.Mercedes-Benz,.Isuzu,.Infiniti.and.Acura
Table 6 Dominating cars by car type
Cartype Dominatingcars ingroup
Family cars Chevrolet Impala, Chevrolet Malibu, Ford Taurus, Honda Accord, Hyundai Sonata,
Saturn L-Series and Volkswagen Passat
Luxury cars Audi A6/Allroad, BMW 5-Series, Cadillac DeVille, Lexus GS300/GS430 and Lincoln
Continental
Sporty cars Chevrolet Camaro, Ford Mustang and Toyota Celica; SUV Hyundai Sante Fe, Pontiac
Aztek and Suzuki Vitara/XL-7
SUVs Hyundai Sante Fe, Pontiac Aztek and Suzuki Vitara/XL-7
Trucks Nissan Frontier and Toyota Tundra
Minivans Chevrolet Venture, Chrysler Voyager, Dodge Caravan/Grand and Mazda MPV
Small cars Saturn S-Series, Toyota Echo, and Volkswagen Jetta
Upscale cars Infiniti I35 and Mercedes-Benz C-Class
Large cars Buick LeSabre, Chrysler Concorde and Ford Crown Victoria
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Sensitivity analyses to subjective and objective measures
Since. DEA. is. used. to. evaluate. performance. by. considering. input. and.
output.data,.the.results.will.depend.directly.on.the.input/output.choices.In.this.section,.we.present.the.estimates.of.car.models.obtained.with.respect.to.different.combinations.of.inputs.and.outputs.In.particular,.we.examine.the.sensitivity.of.the.car.models.efficiency.scores.on.changes.in.the.list.of.objective.vs.subjective.outputs.With.respect.to.the.nine.car.types,.all.of.their.average.efficiency.scores.and.the.number.of.inefficient.car.models.are.found.sensitive.to.both.subjective.and.objective.measures.(except.the.group.of.large.cars)
Overall,.the.greatest.influence.on.a.cars.efficiency.was.the.dimension-
related. (length,. width. and. weight). output.measure. Over. 80%. of. the.inefficient.car.models.have.to.make.improvement.on.these.outputs.The.drive.wheel.output.measure.had.the.second.largest.influence,.with.the.non-availability.of.four-wheel.drive.(4WD).contributing.to.82%.of.the.inefficient. car. models. Another. influential. factor. was. the. head. airbag.test
We.also.examined.the.sensitivity.of.the.cars.efficiency.in.each.category.on.changes.in.the.list.of.other.outputs.The.outputs.Drive.wheel,.Length,.Width. and. Seating. had. the. largest. influence. on. the. efficiency. scores. of.
family. cars. The. outputs. Drive. wheel,. Length,. Width,. Weight,. ABS,.Traction.aid.and.Seating.had.a.large.influence.on.the.efficiency.scores.of.luxury/upscale.cars.Furthermore,.luxury.car/upscale.car.models.can.best.be.differentiated.among.competition.models.through.satisfying.consumers.perceived. notions. of. style. and. comfort The. outputs. Length,. Weight,.Traction.aid.and.Seating.had.the.largest.influence.on.the.efficiency.scores.of.minivans. The. outputs.Length,.Width,.Weight.and.Head. airbag. had.the.largest.influence.on.the.efficiency.scores.of.sporty/SUVs.The.outputs.Drive.wheel,.Side.airbag,.Head.airbag.and.Traction.aid.had.the.largest.
influence.on.the.efficiency.scores.of.trucks.The.results.indicate.that.trucks,.minivans.and.small.cars.can.stand.out.by.doing.especially.well.on.these.objective.features
Brand name effect
Undoubtedly,.affective.elements.such.as.brand.image.play.an.important.role. in. car. purchase,. too. Consequently,. cars. with. strongly. preferred.brand.names.are.perceived.of.high.value.even.when.they.are.too.expensive.given.their.performance.or.specifications.The.brand.strength.is.correlated.with. the. brand.make.efficiency. to. test. this. reasoning.According. to. the.
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brand.equity. evaluation.model.employed.by. the.Allgemeiner.Deutscher.Automobil.Club.(ADAC).(2001),.brand.strength.is.measured.as.an.index.
of.brand.awareness,.recognition,.image.and.sympathy.The.brand.image.data.were.taken.from.the.2003.driver.survey.conducted.by.the.ADAC.The.number.of.problems.detected.by.cars.in.2002.is.also.used.to.correlate.with.the.brand.efficiency.scores.The.first.correlation.is.significant.at.alpha.=.010.and,.as.expected,.the.coefficient.is.negative.(sig.=.0099;.coefficient.=.046).The.second.correlation.is.significant,.too,.but.the.coefficient.is.positive.(sig.=.007;.coefficient.=.035).The.results.show.that.the.efficient.brands.are.those.with.lower.brand.images.and.tend.to.be.those.with.more.car.maintenance.problems.detected.later.Put.another.way,.the.consumers.
experience. fewer. maintenance. problems. with. using. those. inefficient.cars
A general sales model
Additional selection criteria
Efficient. estimates. in.DEA. models. do. not. differentiate. among. efficient.units.How.can.one.rank.all.these.efficient.car.models?.A.simple.selection.strategy.is.to.allow.potential.buyers.to.purchase.among.these.efficient.cars.
according.to.the.additional.determining.factors.in.their.purchase.process.We.might.therefore.conclude.that,.since.efficiency.is.not.calculated.relating.to.satisfaction.or.to.depreciation.and.fuel.economy.(measured.by.mileage.per. gallon,.MPG),. one. should. choose. among. the. efficient. car. models.from.Table. 2,.which.perform.highly. in.satisfaction. scores,. depreciation.and.MPG,.too,.such.as.the.BMW.3-series,.Honda.Odyssey,.Volkswagen.Passat,.Nissan.Sentra.and.the.BMW.5-series,.if.depreciation.and.MPG.are.important.factors,.tooAnother. general. problem. with. the. previous. studies. is. that. they. are.
unable.to.provide.information.on.whether.the.inefficient.brands,.however.defined,.have. large.or.small.purchase. frequencies. Thus,.we.are. unable.to. determine. whether. measured. inefficiencies. are. due. to. temporary.disequilibria.that.affect.relatively.few.consumers,.or.whether.purchases.of.inefficient.brands.are.common,.and.consequent.consumer.losses.are.high.The.issue.is.whether.it.is.possible.to.develop.a.model.that.will.explain.sales. by. including. efficiency. score. as. a. major. influence. factor.While.there.is.a.large.body.of.literature.that.attempts.to.explain.sales.and.market.share. (see.Beatty.&.Smith.1987. for.a. review),. there. is. very. little.work.
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on.determinants.of.sales,.or.on.gains.from.the.effort.to.affect.efficiency.Both.Punj.and.Staelin.(1983).and.Ratchford.and.Srinivasan.(1989).have.
studied.the.determinants.of.cost.savings.(discounts).on.cars,.and.Carlson.and.Gieseke.(1983).have.studied.the.determinants.of.savings.on.groceries,.but.we.do.not.know.of.any.recent.field.studies.of.the.determinants.of.sales.related.to.efficiencyIt.would. be. interesting. to. investigate. if. and. to. what. extent. new. car.
owners.behave.according.to.the.efficiency.estimates.of.this.study.If.these.estimates.were.known.to.everybody.and.no.other.characteristics.were.taken.into. account. before. the. cars. were. purchased,. our. normative. approach.would.imply.that.the.inefficient.models.should.be.avoided.This.can.be.
tested.using.the.sales.statistics.of.year.2002.It.is.expected.that.efficient.car.models.have.larger.than.average.sales,.as.suggested.by.economies.of.scale.or. economies. of. scope. Besides. the. efficiency. consideration,. a. typical.ultimate.consumer.asks.two.questions.in.purchasing.an.automobile:
1. What.is.its.potential.trade-in.value?2. Will.I.get.reasonable.MPG?
On.the.other.hand,.customer.satisfaction.in.general.could.have.an.effect.
on.sales.Regressions.with.these.factors.as.predicting.variables.are.suggested.in.exploring.this.relationship.between.sales.and.efficiency.scores
The model
Following.the.above.discussion,.we.postulate.that.increasing.sales.depend.on.a.production.process.incorporating.the.efficiency.of.the.car.model,.its.depreciation.rating,.MPG.and.customer.satisfaction.about.the.car.modelIn. order. to. simultaneously. test. our. hypotheses. about. the. impact. of.
factors,. efficiency,.MPG,.depreciation.and. satisfaction.on. sales.volume,.we.build.a.multiple.regression.model.using.sales.as.the.dependent.variable.Independent. variables. are. defined. below.The. parameters. are. estimated.including.all.the.car.models.within.each.car.category.that.have.sales.figures.available:
. DV: sales.volume.(by.units). IVs:.efficiency.score.(calculated.through.DEA,.ranging.from.010);.
satisfaction.ratings.on.a.5-point.scale;.MPG;.and.depreciation.(ratings.on.a.5-point.scale)
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Specifically,.we.can.represent.the.determinants.of.sales.by.the.following.relation:
S.=.f.(E,.D,.M,.Sat,.e). (6)
where. S. denotes. sales,. E. is. the. efficiency. of. the. car. model,.D. is. the.depreciation,.M.is.gas.efficiency.measured.by.MPG,.Sat.is.the.satisfaction.with.the.car.model,.e.is.a.random.error.term,.and.f.is.function.Equation.(6).describes.a.function.relating.to.sales.Higher.performance.on.any.of.these.predictors.should.lead.to.higher.sales
Estimation and results
Regression. analyses. are. conducted,. respectively,. to. test. the. impact. of.efficiency.on.sales.for.each.car.category.The.sales.model.is.significant.only.at.the.alpha.=.010.level.for.the.luxury.car.category.(R2.=.0902,.F.=.6866,.sig.=.0073).and.SUV.category.(R2.=.0350,.F.=.2426,.sig.=.0086)The.coefficient.estimates.for.the.two.car.categories.are.shown.in.Table.7
In. the. luxury. car. category,. at. the. alpha. level. 010,.we. can. conclude.that. there. is. a. highly. significant. impact. on. sales. depending. on. the.efficiency. (beta.=. 1685,. sig. =. 0026).The. positive. signs.of. significant.
beta.coefficients.of.efficiency,.satisfaction,.and.MPG.tell.us.that.as.these.three.variables.increase,.sales.gains.increase.But.luxury.cars.with.better.depreciation.didnt.garner.higher.sales.In.the.SUV.category,.at.the.alpha.
Table 7 Estimates for the general sales model by car type
DV(salesunitsbycartype) Salesmodel(sig.) Coefficients(beta) Sig.
Family cars, small cars, large cars, minivans,
trucks, sporty cars, upscale Non-significant
Luxury cars 0.073Constant 0.042
Efficiency 1.685 0.026
Depreciation 1.588 0.020
Miles per gallon 1.252 0.067
Customer satisfaction 1.125 0.029
SUVs 0.086
Constant 0.188
Efficiency 0.582 0.009
Depreciation 0.079 0.737
Miles per gallon 0.227 0.265
Customer satisfaction 0.369 0.152
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level.010,.we.can.conclude.that.there.is.a.highly.significant.impact.on.sales.depending.on.the.efficiency.(beta.=.0582,.sig.=.0009).The.positive.
sign.of.the.significant.beta.coefficient.of.efficiency.tells.that,.as.efficiency.increases,. sales. gains. increase. Cars. with. higher. customer. satisfaction,.better.MPG.and.depreciation.did.not.garner.higher.sales.in.the.SUV.car.category,.probably.owing.to.the.popularity.of.SUVs.and.minivans,.which.are.typically.gas-inefficient.carsEvidently,. the. high-efficiency. car. models. are. the. best. buy. for. many.
consumers. purchasing. luxury. cars. and. SUVs.While. one. might. assume.MPG.to.be.positively.related.to.sales,.the.correlation.between.these.two.across.SUV.car.models.was.not.significant.It.appears.that.consumers.who.
face.brands.that.provide.an.unfavourable.position.on.MPG.are.generally.able.to.compensate.for.this.with.other.attributesThe.luxury.cars.that.sold.well.are.those.with.high.efficiency,.good.MPG.
and.better.customer.satisfaction.Those.best-selling.luxury.cars.also.tend.to.be.the.ones.that.depreciate.fast.The.SUVs.that.sold.well.are.those.that.are.efficient.The.trucks.that.sold.well.are.those.that.are.less.efficient.but.have. good. depreciation. value. The. family. cars. that. sold.well. are. those.that.are.efficient,.but.the.small.cars.that.sold.well.are.those.that.are.less.efficient.and.depreciate.fast
Discussion, conclusions and managerial implications
Consumers perspective
We.have. estimated. that,. on. average,. buyers. of. automobiles. could. save.about.24%.of.the.car.purchase.price.if.they.bought.car.models.of.at.least.equivalent.utility.at.a.lower.price.Consumers.appear.to.consider.only.a.fraction.of.the.models.available.to.them.in.a.given.class,.and.in.this.sense.
they.do.not.perform.a.complete.search.In.car.classes.with.a.large.number.of.alternatives,.or.classes.with.a.large.price.range,.car.buyers.are.likely.to.purchase.inefficient.cars.due.to.their.reluctance.to.thoroughly.search.the.class.The.results.herein.with.respect.to.the.family.cars.category.illustrate.this.effect.This.finding.may.reflect.a.lack.of.incentive.to.seek.information.on.many.alternatives.due.to.costs.of.search,.and.it.may.also.reflect.the.phenomenon.of. information.overload,.which.has. been. studied. in.other.contexts.(Keller.&.Staelin.1987).If.consumers.are.directly.provided.an.efficiency.list.of.car.models,.time.saved.in.searching.and.comparison.is.considerable.Further,.the.accuracy.and.effectiveness.of.decision.making.will.be.very.much.improved
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European. cars. performed. best. in. depreciation,. followed. by. Japanese.cars. American. cars. showed. greater. depreciation. than. European. and.
Japanese.cars,.but.Korean.cars.showed.the.highest.level.of.depreciation.European.cars.have.the.highest.MPG,.while.American.cars.fare.worst.in.the.MPG.category.Japanese.and.Korean.cars.perform.comparably.well.in.the.MPG.category.Overall,.European.cars.are.priced.much.higher.than.the.cars.of.the.other.three.countries.By.car.type,.family.cars.have.the.highest.MPG,.and.trucks.perform.the.worst.on.this.criterion,.although.trucks.are.the.most.efficient.buy.compared.to.other.cars,.followed.by.family.cars.Sporty.cars.and.SUVs.do.the.best.in.terms.of.depreciation,.followed.by.trucks.and.luxury/upscale.cars
Potential. car. buyers. always.wonder. if. the. car. under. consideration. is.worth.purchasing,.as.compared.with.other.competitive.cars.This. study.was. an. alternative. approach. to. help. potential. buyers. find. the. best. car.among.a.variety.of.models
Producers perspective
Recent. visitors. to. Edmundscom. cast. more. than. 80,000. votes. for. the.2002.Consumers.Most.Wanted.vehicle. awards.Which.economy. sedan.
stands.out.from.the.crowd?.Which.luxury.SUV.towers.over.the.rest?.How.do.consumers.choices.compare.with.those.on.our.efficient.car. list?.Are.the.efficient.cars.the.Consumers.Most.Wanted?.Are.the.consumers.least.wanted.also.the.inefficient.cars?Figure.1.provides.a.profile.of.the.efficiency.and.the.degree.of.being.wanted.
by.consumers.for.car.models.in.the.nine.categories.Clearly,.the.precise.boundary.positions.between.quadrants.are.subjective.What.is.apparent,.however,. is. that. no. matter.where. the. boundaries. are. drawn,. some. car.models.that.score.well.on.efficiency.are.not.greatly.desired.by.consumers.
This.is.despite.the.more.general.trend,.also.apparent,.that.higher.overall.efficiencies.are.associated.with.a.higher.degree.of.being.wanted.Clearly,.judging.long-term.viability.on.the.basis.of.overall.efficiency.alone.would.overlook.some.car.models.good.at.attracting.customersIn.Figure.1,.car.models. located.in.the.upper-right.quadrant.should.be.
viable.so.long.as.they.at.least.maintain.(in.the.long.term).that.position.Any. scope.for. improved.overall. efficiency.will. reinforce. the. viability. of.these. car. models. The. long-run. viability. of. car. models. located. in. the.bottom-right.quadrant.depends.on.any.prospects.for.improved.marketing.communication/promotion. strategies. There. is. probably. a. lot. of. scope.for. generating. further. growth. of. buyers. interest. The. low. degree. of.
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being.wanted.of.efficient.car.models.could.be.the.result.of.poor.market.
positioning.or.the.lack.of.effort.in.convincing.consumers.of.the.excellence.of. product. attributes. Otherwise. these. car. models. are. viable.With. an.effective.promotion.and.positioning.strategy,.the.producers.should.be.able.to.move.these.car.models.to.the.upper-right.quadrantCar. models. located. in. the. upper-left. quadrant. are. the. lucky. ones,.
which.are.wanted.by.consumers.despite.their.low.efficiency.scores.Long-term.viability.should.be.expected.from.them.through.scope.for.improved.efficiency,. a.possible.result. of.developing. salient. and.unique. benefits. to.differentiate. from. competitors. Car.models. in. the. bottom-left.quadrant.offer.low.efficiency.and.are.not.much.desired.by.consumers.There.is.scope.for.improvement.in.the.product.features.and.hence.the.overall.efficiency.
Figure 1 Car model eciency vs consumers most wanted
Efficiency of car models
Consumer
swanted HighLow
Most
Least
Small cars: Dodge NeonFamily cars: Saturn L-Series; Mercury SableLuxury cars: Cadillac DeVille; Lincolns Town Car;
Lincolns ContinentalUpscale cars: Chrysler 300M; Infniti I35;
Mercedes-Benz C-ClassLarge cars: Buick LeSabre; Ford Crown VictoriaSporty cars: Audi TT; Pontiac Firebird; Mercury
Cougar
SUV: Chevrolet Tracker; Suzuki Vitara; Isuzu RodeoSport; Suzuki Vitara/XL-7; Mitsubishi MonteroTrucks: Ford Ranger; Chevrolet S-10; Mazda Truck;
GMC SierraMinivan: Toyota Sienna; Caravan/Grand Caravan;
Mazda MPV; Ford Windstar
Small cars: Hyunda Elantra; Nissan Sentra; Ford
Focus; Subaru Impreza; Volkswagen Jetta;Volkswagen Gol
Family cars: Honda Accord; Volkswagen Passat;Toyota Camry; Subaru Legacy and Outback; FordTaurus
Luxury cars: BMW 5 Series, Audi A6; Lexus GS 300and 430
Upscale cars: BMW 3 SeriesLarge cars: Toyota Avalon; Pontiac BonnevilleSporty cars: Mazda Miata; Ford Mustang; Ford
Escape; Toyota Celica; Audi TT; BMW M3SUV: Mazda Tribute; Toyota RAV4; Nissan Xterra;
Toyota Highlander; Toyota 4Runner; DodgeDurango
Trucks: Toyota Tacoma; Nissan Frontier; ToyotaTundra; Chevy SilveradoMinivan: Honda Odyssey
Small cars: Chevrolet Cavalier; Pontiac SunfreFamily cars: Pontiac Grand Prix; Dodge Intrepid;
Chrysler Sebring; Pontiac Grand AmLuxury cars: Cadillac SevilleUpscale cars: Saab 9-5; Volvo S80; Lincolns LS;
Saab 9-3Large cars: Buicks Park AvenueSporty cars: BMW Z SeriesSUV: Isuzu Trooper
Trucks: GMC SonomaMinivan: Chrysler Voyager; Town & Country;Nissan Quest
Small cars: Honda Civic; Mercedes-Benz CLK
Family cars: Nissan MaximaLuxury cars: Lexus LS 430; Acura 3.5RLUpscale cars: NoneLarge cars: NoneSporty cars: Honda S2000; Porsches Boxster;
Chevrolet CorvetteSUV: Nissan Pathfnder; Toyota Sequoia; GMC
Yukon; BMW X5; Acura MDXTrucks: Ford Explorer; Dodge Dakota; Ford F-SeriesMinivan: None
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of.these.car.models.The.producers.also.need.to.develop.more.effective.marketing. promotion. or. positioning. strategies. to. improve. the. overall.
marketing.performance.of.these.car.modelsFurthermore,.it.is.found.that.car.models.in.different.car.categories.are.
not.distributed.in.the.same.pattern.as.depicted.in.the.four.quadrants.of.Figure. 1. Figure. 1. shows. evidence. that. the. degree. of. being.wanted.by.consumers.is.not.always.consistent.with.the.efficiency.score.Clearly,.no.car.models.from.categories.of.upscale.cars,.large.cars.and.minivans.are.located.in.the.upper-left.quadrant.(very.few.in.the.upper-right.quadrant),.but. a. significant. number. of. car.models. from. these. three. categories. are.found.in.the.bottom-right.quadrant.This.indicates.that.better.positioning.
and. promotional. strategies. are. needed. to. market. these. cars. Also,. the.majority.of.car.models.from.the.sporty.and.SUV.categories.are.located.in.the.two.mis-perceived.quadrants.(upper-left.and.bottom-right).This.might.be.due.to.the.missing.attribute.of.sportiness.in.our.DEA.estimation
Limitations and future research
While.we.went.to.considerable.lengths.to.develop.a.list.of.attributes.for.use.in.this.study,.failure.to.incorporate.attributes.that.are.idiosyncratic.to.a.
small.group.of.consumers.could.still.lead.to.biases.in.our.efficiency.estimates.There.is.a.need.to.study.this.problem.and.to.find.ways.of.overcoming.it.There.are.some.attributes.beyond.the.objective.attributes.considered.in.our.model.that.distinguish.car.models,.such.as.mechanical.quality,.body.and.interior.quality,.feature.and.accessory.quality,.performance,.comfort,.style.and.reliability.Although.our.data.are.able.to.distinguish.between.general.attributes.that.may.create.large.amounts.of.efficiency/inefficiency,.they.may.not.be.100%.comprehensive.and.may.fail.to.account.for.those.attributes.that.lead.to.small.price.differences.between.otherwise.similar.models.As.
noted.earlier,.this.might.be.a.general.problem.in.applying.DEA.to.complex.products.with.dimensions.that.are.difficult.to.describe.objectivelyCars.are.extremely.differentiated.products,.and.models.can.differ.from.
one. another. in. many. characteristics. Any. conclusion. derived. from. our.approach. is. conditional. on. the. assumption. that. all. relevant. attributes.have.been.considered.Accordingly,.the.exclusion.of.a.potentially.relevant.attribute.such.as.sportiness.may.have.resulted.in.efficiency.ratios.that.in.part.reflect.the.cost.of.this.missing.attribute.to.consumers.Unfortunately,.this.characteristic.cannot.easily.be.measured.and.is.not.addressed.in.this.study.Nevertheless,.this.study.provides.potential.buyers.with.information.on. the. objective. qualities. of. a. considered. car. and. alternative. models.
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Since.explicit.weights.are.given.to.car.characteristics,.if.a.considered.car.accelerates.slowly.and.is.limited.in.horsepower,.that.car.might.be.perfectly.
efficient. to. a. potential. buyer. who. is. not. interested. in. these. criteria.Professional.tests.in.this.field.can.calculate.how.expensive.the.horsepower.of.an.Audi.is,.how.high.the.shadow.price.of.safety.for.a.Volvo.is,.or.how.expensive.the.design.of.a.BMW.is
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About the author
Pingjun. Jiang. is. an. Associate. Professor. of.Marketing. in. the. School. of.Business,. La. Salle. University,. Pennsylvania,. US. She. received. her. PhD.degree. from. The. Southern. Illinois. University. Her. research. interests.
include. e-commerce,. consumer. behaviour,. pricing. strategy. and. research.methodology. She. has. published. papers. in. the. following. publications:.Psychology & Marketing,. European Journal of Marketing,.Journal ofServices Marketing,.Journal of Product and Brand Management,.InternetResearch,.and.Proceedings of American Marketing Association EducatorsConferencesAddress. correspondence. to:. Department. of. Marketing,. School. of.
Business.Administration,.La.Salle.University,.Philadelphia,.PA.19141,.USEmail:.jiang@lasalleedu
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