Just Noticeable Difference [PDF]

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Just Meaningful Difference Scenario 1 - Appliance Store The JMD for the target market and the product category, in the economic climate, was 15%. Thus, a rebate of 15% on the price of the product would’ve been enough to impact it’s sales. Price of stove = $1000 JMD = 15%



Apt Rebate offer = $150



1. Did the fact that he didn’t know the accurate JMD cost Harry any money? If yes, how much?  Yes, Harry’s ignorance of the JMD cost him money. He sold 20 stoves for $900 each, earning a revenue of $18000. If he had offered the apt rebate he would’ve sold more stoves, say 30. 30 stoves priced at $850 each would’ve earned him a revenue of $25,500. Since, he sold the same number of stores with rebate as he did without it, Harry lost $2000 ($100 per stove). He also, missed out on the opportunity to earn a higher revenue. 2. Did the fact that he didn’t know the accurate JMD cost Garry any money? If yes, how much?  Garry’s ignorance of the JMD cost him money as well. While he sold more stoves with the rebate than he did without it, if he had offered the correct rebate price, he would’ve earned more revenue. Garry sold 30 stoves for $800 each, earning a revenue of $24000. If he had offered the apt rebate he would’ve earned more revenue. 30 stoves priced at $850 each would’ve earned him a revenue of $25,500. He missed out on the opportunity to earn a higher revenue, and in a way lost $1500 ($50 per stove). Scenario 2 - Cereal Brand You need to do what your CMO has demanded, or the brand will be deleted 1. Discuss the various options for making this change.  Since, we have a year to make the change, one way would be to increase the price of the product in stages i.e. 50 cents at a time.



Since JND is 12%, an increase in price by 60 cents ($5 x 12%) or more would impact consumer purchase decisions. If the price is increased by 50 cents at first there may be low or no impact on consumer purchase decisions. The company can sell the cereal box at $5.50 for a few months, and increase the by 50 cents again. Later, if the JND remains the same or even if it falls to 10%, an increase from $5.50 to $6 would not have a real (or any) impact on the sales of the cereal.  Another option would be to reduce the product serving size and adjust the price accordingly. For example: The serving size of the cereal could be reduced from 20oz box to 18oz box. Then, the price can be adjusted to $5.05. With a JND of 12%, 2.4oz is the noticeable difference in product serving size. Thus, the decrease in serving size to 18oz shouldn’t have a real impact on its sales. Increasing price by 5 cents is also not a noticeable difference. 2. Why is it important to understand the just meaningful difference?  Just Noticeable Difference is the minimal amount of change in stimuli that a person can detect. Understanding JND is crucial to maintaining sales or even increasing the sales of a product. Knowledge and correct use of JND can help a company save money, be noticed or even have changes (made to the product) go unnoticed, and increase revenue. For example, negative changes made to the product like increase in price, decrease in size or quality, can go unnoticed by a consumer if the company keeps these below the JND threshold. In the same way, positive changes like improvements to product packaging, serving size, quality or decrease in price can be made more apparent to the consumer by making these above the JND threshold. JND is also an effective tool in determining the value of discounts and rebates a company should offer on its product to attract consumers and increase sales. This is clear from the stove case example. Therefore, JND is an important strategic tool that can influence consumer behavior and thus, it is extremely useful to understand.