Vibes Company Mini-Case Part 1 Holbrook INSPECTION

Mini-Case – The Vibes Company, Inc., Part One

The questions in this mini-case should be answered by each Integrated-Project Group (IPG) working independently. Please turn in one set of answers – preferably typed or, if necessary, very neatly handwritten – from each IPG, with the names of all members clearly indicated at the top of the first page. It is the responsibility of each IPG to make sure that all members participate equally in completing this exercise. Please do not discuss this or other mini-cases or compare answers with the members of other IPGs. All IPG answers must be turned in at the beginning of class on the day when the assignment is due.

Unlike other mini-cases used in B6601, answers to questions pertaining to the Vibes Company may be obtained by using a spreadsheet with data manipulations provided by a financial/statistical software package such as Excel. For example, the present exercise involves using values for one set of variables to compute values for another set of variables. An Excel-type program should come in handy for this. However, please hand in only your answers and not all the intervening steps involving spreadsheet calculations. Good luck and have fun.

As of Spring 2004, The Vibes Company, Inc. has recently acquired the rights to a much- venerated but now-extinct brand name – Deagan – and its CEO, Mr. Milt Burton, is currently contemplating the possibility of introducing a new Deagan model – the Deagan Millennium Vibraharp – into the already crowded marketplace for vibraphones.

This type of musical instrument – referred to as a vibraphone, vibraharp, or vibes – resembles a xylophone or a marimba, but with certain key differences. Like these other instruments, a vibraphone consists of bars arrayed horizontally to form a musical scale over multiple octaves. These bars are struck by mallets made of rubber balls wrapped in yarn or cord. The sound of the bars vibrating is very pure – resembling that of a bell or tuning fork – and is reinforced by resonators that hang below the bars to amplify their loudness. Unlike the marimba – whose bars are made of wood – the vibraphone has bars made of silver or gold metal (usually an aluminum alloy). Further – unlike the xylophone or marimba, on which a note can be sustained only by repeatedly striking the appropriate bar (as in a drummer’s roll) – the vibraphone has a sustain pedal that dampens the tone or not, depending on how long the musician wishes the sound to continue ringing. Finally – unlike both marimbas and xylophones – most vibraphones (though not all) have fans inside their resonators powered by a motor (whose speed may or may not be adjustable); as these fans turn, they open and close the resonators, thereby giving a tremolo-like effect to the sound of the vibes. (Note that the speed of this tremolo effect is very important to the tonal quality produced. Some players [e.g., Gary Burton] use no tremolo at all. Others [e.g., Joe Locke] use a very slow vibrato [e.g., around 60 beats per minute]. Others [e.g., Milt Jackson] opt for a moderate speed [e.g., 120 beats per minute]. While some older players [e.g., Lionel Hampton] used a much faster tremolo [e.g., around 240 beats per minute or higher].)

As a first step, Mr. Burton has commissioned an exhaustive survey of all competing brands and models of vibraphones. His market-research team – headed by Mr. Victor “Red” Hutcherson – has identified 58 makes and models of vibraphone currently available on the market. In each case, Mr. Hutcherson’s team has compiled data on the following features of the various instruments (with abbreviations shown in parentheses):

Number of Bars (numbars) = the number of bars included on the instrument (twelve bars per octave plus one – e.g., 37 bars for a three-octave vibraphone)

Average Width of Bars (avewidth) = the average width of the bars in inches

Number x Average Width (numxwidth) = the length of all the bars laid out side- to-side (in inches)

Graduated (graduated) = scored 9 for bars that vary in width from bottom (wide) to top (narrow) and 1 for bars of the same size (where graduated bars are considered by many to produce a better tonal quality)

Gold/Silver (goldsilver) = scored 9/1 for bars that are gold/silver in color (a purely cosmetic feature that does not affect the sound of the instrument)

Arched/Straight/Gapped Resonators (archgap) = scored 9 for resonators whose front follows an attractive arch-shaped pattern; 5 for resonators whose front follows a more functional straight line; 1 for resonators whose front includes only those needed to handle the “black” keys (sharps and flats), making the instrument lighter in weight and cheaper to produce, but giving it an appearance that resembles a smile with several teeth missing

Footprint (footprnt) = the surface area covered by the top of the instrument ([{bottom width + top width}/2] x length) (in square inches)

Weight (weight) = weight of the instrument (in pounds)

Console (console) = 9 if the instrument has solid and furniture-like sides that do not fold up for ease of transportation; 1 if the instrument has a frame that easily folds for portability; 3-5-or-7 if the degree of collapsibility lies somewhere in between the two extremes

All-Terrain (alltrain) = 9 if the instrument rides on a frame equipped with large pneumatic wheels for moving over rough terrain; 5 if the instrument has a “motocart” with oversized rubber wheels; 1 if the instrument has only minimal casters for short movements on a flat surface

Height Adjustment (hghtadj) = 9 if the height of the instrument can be adjusted for playing comfort; 1 if the height is fixed

Variable Speed (varspeed) = 9 if the instrument features a variable-speed motor; 5 if it features a single-speed motor; 1 if it has no motor

Market Price (mktprice) = an average of prices at which the relevant make and model is offered for sale on the Web or via direct distribution from the manufacturer (in dollars)

More detailed consideration of these features-based data will concern us at greater length in Part Two of the Vibes Company Mini-Case. For now, however, we shall focus on a second stage of the analysis conducted by Mr. Burton and his market-research team.

Specifically, Mr. Hutcherson has conducted further tests to determine the psychophysical relationships between the features just enumerated and various perceived attributes of the instruments in question. In particular, extensive interviews with a broad cross-section of vibes players have identified the following set of equations for estimating five key perceived attributes (tonal quality, size, maneuverability, elegance, and affordability) on the basis of key features (where feature scores are standardized across makes-and-models to a mean of 0.0 and a standard deviation on 1.0):

Tonal Quality (tone) = the degree to which the instrument produces a beautiful, pure, ringing sound at the desired tremolo speed over a wide range of the musical spectrum = .25xZ(numbars) + .25xZ(avewidth) + .25xZ(graduated) + .25xZ(varspeed)

Size (size) = the degree to which the instrument is physically large, bulky, imposing, and space-consuming = .25*Z(numxwidth) + .25*Z(footprnt) + .25*Z(weight) + .25*Z(console)

Maneuverability (maneuver) = the ease of collapsing the instrument, transporting it from location to location, and setting it up in an optimal playing position = - .25*Z(weight) - .25*Z(console) + .25*Z(alltrain) + .25*Z(hghtadj) [note the negative coefficients attached to weight and console in this equation]

Elegance (elegance) = the aesthetic appeal of the instrument regarded as a beautiful piece of sculpture-like furniture = .25*Z(goldsilver) + .25*Z(archgap) + .25*Z(console) - .25*Z(alltrain) [note the negative coefficient attached to alltrain in this equation]

Affordability (afford) = the degree to which the instrument commands a market price that any musician can easily afford = - Z(mktprice)

The full set of scores on the perceived attributes for each of the 58 makes and models of vibraphones currently on the market appear in the following table.

Table

Perceived Attributes For 58 Makes and Models of Vibraphone ______

Make-&-Model Tone Size Maneuver Elegance Afford ______

Adams AV1 .17 .35 .31 -.10 .62 Adams AV1F .17 .50 .63 -.42 .37 Adams AV2F -.45 .50 .63 -.42 .54

Bergerault VA .28 -.22 .17 .14 -.83 Bergerault VGC .28 .95 -1.61 1.61 -1.43 Bergerault VP4 1.42 1.61 -.51 .50 -1.77 Bergerault VPS .88 .78 -.13 .50 -1.42 Bergerault VPV .28 -.29 .10 .66 -1.36 Bergerault VR -.90 -.86 .28 .14 -.83 Bergerault VU II -.90 -.86 .28 .14 .05

Dynasty DVP30 Concert .50 .60 .53 -.31 -1.40 Dynasty DVP35 Concert .88 1.24 .31 -.31 -1.55

Marcon VP300 -.21 -.64 .21 -.24 -.35 Marcon VP400 .94 1.12 -.48 -.24 -1.96

Mus’l Perc’n Antiqued -.42 -.03 -.74 -.26 1.89 Mus’l Perc’n Shiny -.42 -.03 -.74 -.26 1.89

Musser M44 Combo -1.58 -1.54 .50 -.50 1.26 Musser M7044 Combo -1.58 -1.19 -.01 -.82 1.06 Musser M8044 Combo -1.58 -1.16 .94 -1.14 1.21 Musser M46 One-Nighter -.45 -.40 .23 -.18 .85 Musser M46M One-Night -.14 -.35 .19 -.18 .57 Musser M7046 One-Night -.45 -.14 -.23 -.50 .63 Musser M7046M One-Night -.14 -.03 -.32 -.50 .37 Musser M8046 One-Night -.45 -.01 .71 -.82 .78 Musser M8046M One-Night -.14 .01 .68 -.82 .46 Musser M48 Pro Traveler .18 -.59 -.29 .33 .19 Musser M48S Pro Traveler .18 -.60 -.29 -.18 .32 Musser M55 Pro Model .18 -.36 .20 .14 .41 Musser M55G Pro Model .18 -.36 .20 .66 .33 Musser M7055 Pro Model .18 -.04 -.33 -.18 .27 Musser M7055G Pro Model .18 -.04 -.33 .34 .11 Musser M8055 Pro Model .18 .01 .68 -.50 .39 Musser M8055G Pro Model .18 .01 .68 .01 .28 Musser M58 Piper -.45 -.03 .07 -.50 .31 Musser M58M Piper .18 .02 .03 -.50 -.01 Musser M75 Century .18 .79 -1.55 1.61 .18 Musser M75LH Lionel H. .18 .79 -1.55 1.61 -.49

Premier OAV300 .20 -.51 .28 .14 .66 Premier Pro Symphonic .20 -.27 .04 .38 .36

______

Table – Continued ______

Make-&-Model Tone Size Maneuver Elegance Afford ______

Ross R705 Challenger -.98 -.83 .38 -.50 1.29 Ross R715G Pro Artist .18 -.55 .34 .33 .73 Ross R715S Pro Artist .18 -.55 .34 -.50 .89 Ross R715SF Pro Artist .18 -.55 .34 -.18 .89 Ross RU1715S Pro Artist .18 -.05 .83 -1.14 .74

VanderPlas LW30 -.23 .24 -.15 .25 -.16 VanderPlas LW30V .39 .17 -.09 .25 -.83 VanderPlas LW32 -.08 .49 -.24 .25 -.67 VanderPlas LW32V .54 .42 -.17 .25 -1.33 VanderPlas LW35 .15 .85 -.37 .25 -1.12 VanderPlas LW35V .77 .79 -.30 .25 -1.79 VanderPlas LW40 .69 2.24 -1.32 1.05 -1.44 VanderPlas LW40V 1.31 2.18 -1.26 1.05 -2.11

Yamaha YV1600 -.98 -1.12 .46 -.18 1.10 Yamaha YV2700 G. Res. .18 -.32 .24 -.18 .16 Yamaha YV2700 S. Res. .18 -.32 .24 -.18 .45 Yamaha YV3710 .18 -.32 .24 .33 -.42 Yamaha YV3910 .56 .12 .16 .01 -.68 Yamaha YV520 -1.26 -1.63 .53 -.50 1.33 ______

In a third stage of data collection, Mr. Hutcherson’s marketing-research team has surveyed a large and representative sample of 1,462 vibraphone owners to explore the values that they place on the five attributes just described. After extensive analysis, Hutcherson has suggested to Mr. Burton that the following four segments (with percentages shown parenthetically) comprise the vast majority (90%) of the vibes market:

Students (45%). The largest segment of vibes customers, students are beginning musicians who are just learning to play an instrument, often as members of a school orchestra or a small combo composed of friends and relatives. These fledgling artists have no long-term plans for careers in music and are unlikely to continue their musical activities past (say) graduation from high school. They do not care much about elegance of appearance or tonal quality. Rather they need an instrument that is easy to carry to rehearsals and that their financially-strained parents can afford.

Semi-Pros (25%). Semi-pros consist of dedicated amateurs or part-time professionals who love music and who practice it as an avid hobby or avocation. They do not have enough skill or confidence to quit their “day jobs,” but they work hard at their musical activities – often as members of groups that practice together frequently and perhaps play a few gigs around town. The ability to move an instrument with ease from home to

rehearsals to gigs is of paramount importance to them, especially because they usually have to move it themselves in the back of the family sedan. Beyond that, they care deeply about how the instrument sounds and are much less concerned about how it looks or even what it costs.

Stars (5%). A few talented and accomplished musicians make a full-time living in music – performing as members of established and well-known bands or orchestras and often traveling over wide distances nationally or even globally. Because they have assistants and road managers who arrange to transport their instruments from location to location, they place no value on ease of transportation. Rather, they are willing to spend whatever it takes to acquire the best-sounding instrument possible – preferably one that will display an elegant appearance when they perform on stage in front of a large and appreciative audience.

Decorators (15%). Finally, a surprisingly large group of vibes customers tend to view the instrument as a classy piece of furniture – something like a large sculpture that they can park in a corner of the living room to look nice so as to impress their friends. Because these people are basically tone deaf and never actually play the instrument, they place no value on tonal quality. Rather, they seek an elegant and imposing instrument – one whose high price will make it an enviable status symbol.

Specific survey questions addressed to members of these four segments of customers have obtained desirability scores for each perceived attribute to represent the degree to which that attribute is valued by each segment of the vibes market. These attribute- desirability scores – normalized in each case to sum to zero – are as follows:

Attribute-Desirability Scores

Segment Tone Size Maneuver Elegance Afford

Students -1 -3 +3 -3 +4

Semi-Pros +3 -3 +4 -2 -2

Stars +4 0 -3.5 +3 -3.5

Decorators -3 +4 -4 +7 -4

Mr. Burton is aware that customers’ purchase decisions rest on various ways of processing information concerning the various attribute beliefs and desirability weights discussed thus far. He is also aware that some customers make highly rational, systematic, and carefully-considered choices whereas others tend to rely on various sorts of simplifying heuristics. Mr. Burton believes that, for most, the vibes-purchase decision is important enough that a fairly high level of effort will be expended to make the best possible choice. Indeed, he believes that many customers will employ a carefully-

Copyright © Trustees of Columbia University in the City of New York For permission contact [email protected] 212-854-7173 8 calculated multi-attribute model involving a consideration of the various relevant beliefs weighted by their desirabilities. Mr. Hutcherson informs him that such multi-attribute attitude models (MAAMs in the form of ?BW) are frequently employed for diagnostic purposes in marketing research for cases where – because of high purchase importance – it makes sense to assume an economically rational customer.

Question #1. Assuming that – consistent with the importance of the decision – most customers employ a choice strategy that can be accurately represented by MAAM in the form of ?BW, which three makes and models would be most preferred by each of the four key market segments and what would be the overall scores (to two decimal places) for the top-three makes-and-models in each segment?

On the other hand, as Mr. Hutcheson has reminded Mr. Burton, some customers approach the buying decision in a more haphazard manner. Perhaps because the decision is not so important to them or because they are pressed for time or because they are just plain lazy, they adopt various simplifying “decision heuristics” of one sort or another. For example, in pursuit of “bounded rationality,” they may consider only a restricted subset of brands or models – an “evoked set” – with which they already happen to be familiar. Or they may look only at those alternatives that pass a cut-off on some highly-desirable attribute (sometimes referred to as “elimination by aspects”). Or they may simply rank all options on the most-desirable attribute and pick the one with the highest score (a “lexicographic rule”). Further, they may combine these heuristics in various “hybrid” approaches designed to minimize their expenditure of time and effort while still reaching a “good enough” or “satisficing” decision.

Question #2. To get a feel for how these decision heuristics work, please indicate which make-and-model would be chosen under the following two scenarios.

Scenario #1. A semi-pro pursues a hybrid approach in which she considers only the subset of brands with which she is already familiar (Musser, Ross, Yamaha); eliminates all those models that do not score above 0.0 on maneuverability; and – from the remaining set – applies a lexicographic rule to select the make- and-model that ranks highest on tonal quality.

Scenario #2. A student pursues a similar hybrid approach in which he considers the same subset of well-known brands (Musser, Ross, Yamaha); eliminates all those that do not score above 0.0 on affordability; and – from the remaining set – applies a lexicographic rule to select the make-and-model that ranks highest on maneuverability.

After consultations with a team of engineers headed by Mr. Terry Nelson-Harris, Mr. Burton has concluded that the Vibes Company, Inc. would be best-equipped to produce a

Copyright © Trustees of Columbia University in the City of New York For permission contact [email protected] 212-854-7173 9 fairly light and portable instrument with relatively lackluster tonal quality. Specifically, limitations in the availability of materials, constraints on flexibility in the manufacturing process, and the local supply of only semi-skilled workers combine to restrict Mr. Burton’s range of choice in proposing a new Deagan Vibraharp – tentatively called the Deagan Millennium. Given these considerations, Mr. Burton is considering an option based on a configuration of design features that, Mr. Nelson-Harris and Mr. Hutcherson tell him, will position the Deagan Millennium as follows on the key perceived attributes discussed earlier: Tone = -2.00; Size = -1.3; Maneuver = 1.1; Elegance = -1.5; Afford = 1.4.

Question #3. Which market segment is most likely to develop a preference for the Deagan Millennium Vibraharp and why? To what extent – measured quantitatively - would the Deagan Millennium enjoy a differential advantage in appealing to that market segment? To what extent – measured quantitatively - would the Deagan Millennium enjoy a differential disadvantage in appealing to the other three market segments?