Making every decision smarter: Dr Alessio Ishizaka
Research might have provided an answer to the question most business managers ask – how to know more about every individual customer and their preferences.
In a study of how students select a bank, researchers at the University of Portsmouth have tested a model which predicts with much greater accuracy than previous models why people choose one product over another.
Dr Alessio Ishizaka, a specialist in decision analysis at Portsmouth Business School, and his co-author, Nam Hoang Nguyen, MSc financial decision analysis student, have published their case study in the journal Expert Systems with Applications.
Dr Ishizaka said: “Understanding consumer needs is one of the holy grails of good business but old models for determining what people want are imprecise. These assumed everyone has the same degree of fuzziness or imprecision about what they want, and this is clearly not the case.
“The new model gives businesses much greater power to predict the variables of human choice with all its vagueness and imprecision. Having a better understanding of the precise preferences of each customer will bring major benefits to companies.”
The new model, called calibrated fuzzy AHP, combines the best of ‘fuzzy set theory’ and ‘Analytic Hierarchy Process’ (AHP). Each is considered good at predicting some aspects of human choice, but neither was elastic enough to give a true picture of choices customers might make.
The calibrated fuzzy AHP tool could be used by any person and for any decision, including choosing suppliers, ranking products, and deciding on a new location for a company to be based.
Dr Ishizaka and Nam applied the combined model to a small-scale test of what 40 students consider the most important when opening a student bank account.
Overall, students rank banks by the quality of their personal service first. Bonuses, including free rail tickets, gadgets or cash-back offers, were ranked second, and least important were financial factors, such as overdraft charges and interest rates.
Dr Ishizaka said: “The development of an appealing product is likely to have a long-term impact on the profitability of any company, but is especially true in banking where students often remain with the same bank after they have graduated and when they are earning significant salaries.
“It is in the best interests of banks to attract and retain these customers early.
“Banks now understand the priorities of customers but it has taken them a long time with a lot of trial and error. In the past they absolutely did not care about their service, but now they are extending their opening hours, cutting waiting times and being more responsive to the expectations of customers.
“It would have been more profitable if they had done this a long time ago.”
Dr Ishizaka added that it was essential to not only understand the preference of the consumer, but also to have a strategy in place to meet their expectations.
The new model is a starting point and the researchers hope to study it further and combine it with other Multi-criteria Decision Analysis (MCDA) techniques.
