Scaling of preferences

A reputable construction company used to address their customers with a yearly survey to measure their perception of the quality of the firm. Respondents were requested to give a grade, on a scale of 1 to 10, for the performance of the company in regard to various criteria that were considered to be relevant:

• Communication;

• Eye for customer's interests;

• Quality control;

• A soft variable is a variable determined by the subjective view of one or more individuals.

On all criteria the company scored well above seven, so everything seemed to be in order. Until, that is, one of our graduates (Sneekes, 2003) raised the question: 'How do you know that your major competitors don't score an eight?' After all, to be selected in a bidding procedure, to be 'good' is not good enough. One has to be perceived as better than the competing candidates. The answer was: 'We don't know, but we cannot ask our customers how we score compared to specific competitors.' This problem was resolved by asking each respondent to provide three scores per criterion:

• Score of the worst competitor the respondent had ever experienced;

• Score of the best competitor ever experienced.

There was no need to disclose the identities of those worst and best performing competitors. This simple change in the survey, made it possible to establish how the company scored in comparison to the competition. The company's objective was to score at least in the top quartile in all criteria. With the assumption that performance of competitors follows a normal distribution, the relative position of the firm on each criterion could be assessed. It turned out that on two criteria the firm scored just below the top quartiles, suggesting a need for managerial measures in those areas.

This example from practice shows how easily one can fool oneself if the measurement scales of preferences are not properly defined. The earlier survey results were completely meaningless, if not misleading. As becomes apparent, there exists no independent scale on which preference can be measured. There is no (known) zero-point (origin) representing the lowest preference. One cannot say: 'I like my new car twice as much as my old one.' To measure preference correctly, measurements have to be taken relative to two arbitrarily chosen reference points. What is measured is the ratio of differences and this operation is independent of the chosen origin (zero-point) and selected unit of measurement.

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