Dynamic Modelling of Value Perception: More Useful Than It Might Sound
Introduction
We often assume that the way we evaluate a certain product or service is by adding up all of its positive and negative features, thus giving it a certain “score”. However, in reality, our internal evaluation mechanism works a little differently.
For instance, imagine staying at a hotel which is located in an excellent spot, the staff are very kind, and it’s very roomy. You’d be very satisfied, right? Now, imagine that hotel is absolutely filthy dirty.
Would you still stay at the hotel, if everything else is done very well?
No, because we tend to measure goods and services based on their weakest point. In the video below, our peers describe the decision method in more detail, in the example they will be choosing a restaurant to visit for lunch.
In this post, we will teach you how to evaluate different options based on the importance of the criteria that influence your choice.
We often assume that the way we evaluate a certain product or service is by adding up all of its positive and negative features, thus giving it a certain “score”. However, in reality, our internal evaluation mechanism works a little differently.
For instance, imagine staying at a hotel which is located in an excellent spot, the staff are very kind, and it’s very roomy. You’d be very satisfied, right? Now, imagine that hotel is absolutely filthy dirty.
Would you still stay at the hotel, if everything else is done very well?
No, because we tend to measure goods and services based on their weakest point. In the video below, our peers describe the decision method in more detail, in the example they will be choosing a restaurant to visit for lunch.
In this post, we will teach you how to evaluate different options based on the importance of the criteria that influence your choice.
Key Concept
In order to choose the restaurant that these students will go to, they decided to look at three different criteria: service time, pricing and food quality.
The importance of each criteria will be measured between 0.5 (not very important) and 1.5(very important).
The performance of each restaurant will be measured between 0 (terrible) and 1 (great).
In order to calculate the total score of every restaurant considered, we will raise the performance score of each criteria of the restaurant to the power of the importance of this criteria. Then we will multiply every result by each other to get the total score of every restaurant.
Evaluation of the Decision Method
Importance of each criteria
Since the most important criteria for these students was the service time, let’s give it an importance of 1.5.
Students do not have much money, so the pricing of the restaurant is fairly important, so let’s give it a 1.
The food quality was the least important amongst these three criteria, so we will give it a 0.75.
Now, let’s take a look at every restaurant that we might go to and how they perform in terms of the chosen criteria:
Italian Brasserie
Italian Brasserie has great food quality, but still not good enough to give it the best performance, so we will give it 0.9. If we raise it to the power of the importance figure of 0.75, we will get 0.92.
Italian place is not very expensive, so we will give it 0.8. If we raise to the power of the importance figure of the pricing criteria of 1, we will get 0.8.
Italian place has quick service; we will give it 0.9 in terms of performance. If we raise it to the power of the importance figure of 1.5, we will get 0.85.
Now let’s multiply every result by each other to get the total score of the Italian restaurant: 0.92 * 0.80 * 0.85 = 0.63
Chinese Restaurant
Chinese Restaurant has fantastic food, so we will rate its performance as 1.0. If we raise it to the power of the importance figure of 0.75, we will get 1.0.
Chinese place is more expensive than the Italian Brasserie, so we will give it 0.7. If we raise to the power of the importance figure of the pricing criteria of 1, we will get 0.7.
Chinese place in this area does not have quick service, it takes about 20 minutes for the food to be ready, so we will give it only 0.7 in terms of performance. If we raise it to the power of the importance figure of 1.5, we will get 0.59.
Now let’s multiply every result by each other to get the total score of the Chinese restaurant: 1.0 * 0.70 * 0.59 = 0.41
Fast Food Chain Restaurant
Fast-food chain restaurant does not have very good food, so we will rate its performance as 0.6. If we raise it to the power of the importance figure of 0.75, we will get 0.68.
Fast-food chain restaurant has the cheapest available food, so we will give it 1.0. If we raise to the power of the importance figure of the pricing criteria of 1.0, we will get 1.0.
Fast-food chain restaurant has the quickest possible service in the area does not have quick service, it takes about 2 minutes for the food to be ready, so we will give it the best possible score of 1.0 in terms of performance. If we raise it to the power of the importance figure of 1.5, we will get 1.0.
Now let’s multiply every result by each other to get the total score of the Fast-food chain restaurant: 0.68 * 1.0 * 1.0 = 0.68
Results:
Fast-Food Chain Restaurant = 0.68
Italian Brasserie = 0.63
Chinese Restaurant = 0.41
After evaluating each single restaurant one by one, we may come up to a conclusion that it would be logical for this group of students to have their lunch at the fast-food chain restaurant, since it received the best total score based on the importance of different criteria.
Since the most important criteria for this group of students was to make sure that they get their food really quickly, it pulled the total score up.
Realistically, our students' lunch break ran out by the time they finished their calculations... At least they know where to go next time!
Conclusion
People often assume that we evaluate a certain product or service is by adding up all of its positive and negative features together. In reality, the importance of each criterion varies between one another.
It is crucial to assign importance to every single criterion that affects your possible options, as some of the criteria has more value to you than others.