A quantitative decision matrix for increasing value for both buyers and sellers: THE METHODOLOGY part 2

A quantitative decision matrix for increasing value for both buyers and sellers: THE METHODOLOGY part 2

Step 3: Define a rating scale to measure the vendor’s success per criterion

Once a weighting scale had been created that accurately reflected the importance of each criterion within the decision-making process, the next step was to define a rating scale. The rating scale is used to measure the effectiveness the vendor displayed in each of the criteria.

There are no set rules for how granular this rating scale should be as long as the voting group is satisfied that it will allow them enough latitude to determine varying degrees of ability on the part of the vendor (ie from poor ability to excellent ability). A recommended scale is shown in Figure 1.

The five-point scale in Figure 1 provides enough granularity for a single member of the group who is rating a vendor to distinguish between ‘moderately displays ability to meet the requirements’ from ‘displays good ability to meet the requirements’.

Figure 1 Rating scale

While it was previously stated that there are no predefined rules for the degree of rating scale granularity, it should be noted that a two- or three-scale rating might not be sufficiently granular to differentiate between the varying degrees of proficiency of the competing vendors.

Step 4: Identify the critical criteria that must meet a minimum score

Step 4 is an optional step that practitioners

may or may not decide to use based on the criteria that are set in their particular model. Practitioners must ask themselves ‘are there certain criteria that we feel are critical enough to the project that a vendor must meet a minimum score in order for them to be considered at all?’

If one of the team members determined that the minimum score method is appropriate for their quantitative decision- making model then there are two steps to follow to incorporate this into the model.

Figure 2 Critical criteria

The first step in the process involved determining which criteria are absolutely critical to the success of the research/ segmentation project. As shown in Figure 2, the critical criteria for this project were determined to be:

Once the critical criteria had been identified, the second step was to determine what the minimum criteria rating should be, referring to the rating scale that was developed in Step 3. In Figure 2, the minimum vendor rating required on the critical criteria was set at ‘2’ which referred to ‘slightly displays ability to meet the requirements in this area’.

Now that the critical criteria were set in place, if a team member rated a vendor less than 2 on a criterion marked as critical, then the value assigned to that criterion would show as ‘DNMC’ meaning ‘does not meet minimum criteria rating required’. As shown in Table 2, Vendor No. 1 rated less than 2 on only one of the critical criteria (‘project management capability’) and was immediately eliminated from the selection set by team member No. 1.

Table 2 Research vendor selection matrix— For member No. 1

Minimum vendor rating required on critical criteria
is 2

Research vendor
No.

1

Research vendor
No.
2

Research vendor No

. 3

Criticalcriteria

Weight

Rating

Value

Rating

Value

Rating

Value

H

Actionability of research/segments

0.1150

300

0.35

4.00

0.46

3.50

0.40

Understands our needs

0.1150

4.00

0.46

3.00

0.35

3.25

0.37

Experience, references, credentials, CV, etc

0.1150

2.00

0.23

3.00

0.35

2.00

0.23

H

Sound methodology

0.1150

3.00

0.35

4.50

0.52

3.00

0.35

H

Project management capability

0.1150

1.75

DNMC

2.50

0.29

2.50

0.29

Resources can handle all three projects

0.0600

3.00

0.18

3.00

0.18

3.00

0.18

Identifiability of research/segments

0.0600

3.00

0.18

4.00

0.24

4.00

0.24

Differentiable, measurable, substantial segment

0.0600

2.50

0.15

3.50

0.21

4.00

0.24

Synergies, savings, costs, timing

0.0600

3.00

0.18

4.00

0.24

2.00

0.12

Analysis

0.0600

3.00

0.18

4.00

0.24

4.00

0.24

H

Chemistry

0.0600

2.50

0.15

4.00

0.24

3.00

0.18

Contingency planning

0.0325

3.00

0.10

2.00

0.07

3.00

0.10

Reporting

0.0325

3.00

0.10

2.00

0.07

3.00

0.10

Total

1.000

DNMC

3.44

3.03

As in Table 2, although this particular team member eliminated Vendor No. 1, it will be seen later that the participant’s rating was still used to calculate the mean value among all voting team members. The reason for this is to ensure that the team member’s rating is included with their peers’ ratings, and therefore reflected in the overall mean value for each vendor.

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