OMAO
Sustainable Plastic Cups
Arianna Haven, Isha Negi, Zachary Stecher, Rishi Jarmarwala
December 13, 2021
Abstract
Our survey analysis was done on behalf of a company named OMAO, which already makes biodegradable straws and is interested in expanding into the biodegradable cup business. Disposable plastic cups are highly convenient products that fall in a large market catered towards events, social gatherings, offices, home use, and more. However, single use plastic has a long lasting negative effect on the environment. OMAO’s straws are able to degrade within 90 days after being thrown out. They are hoping to apply this material technology onto their plastic cup production. This product is meant to compete with other biodegradable and non-biodegradable plastic cups in the market. The cup will be catered towards the regular consumer market and the product attributes we are analyzing are biodegradability, price, size (volume), design (logo or no logo), opacity, and quantity (how many sold together). Based on the analysis and feedback from the company’s CEO, we recommend that OMAO produces a biodegradable 16 oz, opaque cup with a logo and that they sell it in packs of 50 for $7.50 ($0.15/cup).
Introduction
OMAO is a “green” plastic company founded in 2020 by a team of individuals that were frustrated with paper products. While paper products are very environmentally friendly, their function is short-term as most can become useless when wet. On the other hand, plastic products are more convenient to use but are much more harmful to the environment through toxic pollutants when sitting in landfills. OMAO wants consumers to be able to use plastic products while not harming the environment, so they developed their own biodegradable plastic. Most biodegradable plastics use Polyacitic Acid (PLS) or “Corn Plastic,” which can degrade in an ideal temperature-controlled environment but could take between 100-1000 years to degrade if not held in the right conditions. OMAO, however, uses Polyhydroxalkanoates (PHA), which is a vegetable-oil based naturally-occurring material that produces CO2 and H20 when broken down. OMAO has already developed and sold PHA straws, which can degrade in 90 days after being thrown out or composted. Moving forward, OMAO is branching out into more plastic products and is interested in designing a plastic cup that uses the same PHA material as the straws. Since plastic cups are a regularly used product by the typical consumer, the goal is to create a durable, environmentally-friendly product that can compete with other plastic cups and become a prevalent item in the market. 1
Product Attributes
The product attributes of disposable plastic cups that might be significant to consumers to include the following:
- Price
- Competing product prices range from $0.03 to $0.28 per cup. To stay competitive we need to stay well within this range.
- Size
- Competitors range in sizes from 9 to 18 ounces.
- Quantity
- The per-pack quantity in which competing products are sold ranges from 25 to 2000 cups.
- Design
- Colors, logos, and structural design aesthetics can give or take away from a cup’s appeal or versatility.
- Opacity
- Some cups are clear and allow a beverage to be visible while others are opaque and conceal their contents.
- Material Biodegradability
- As our product is made of a biodegradable plastic, PHA, we would like to see if environmental consciousness plays a part in decision making within this market.
Decision Variables
Decision variables are the components of the design that we will consider for the final rendering of the product. All of these variables are also included in the product attributes we have outlined. This is due to the fact that in simple, single-use products with a fixed material, most design variables are surface level. Our decision variables and ranges will include the following:
- Price
- $0.05 to $0.30 per cup
- Size
- 9 or 16 fluid ounces
- Quantity
- 25 to 100 cups in each package
- Logo
- Whether to include OMAO’s logo on the cup or not
- Opacity
- Clear or fully opaque
- Material
- Regular plastic or Sustainable Plastic
Sample Product
This shows an example of the opaque 16 oz cup with the OMAO logo.
Survey Design
Eligibility criteria for respondents to be 18 years or older was set in the final survey. The purpose was to filter the prospective buyers who can make conscious customer perspective choices while taking the survey. We also included a screen-out question asking if the respondents use disposable plastic cups. Additionally, a sample question is displayed with three choices and a obvious “right” answer to make sure the respondee is paying attention. Lastly, a shopping scenario is introduced at the start of the survey to help respondents make realistic choices as done in daily life.
Demographic questions provide context of the background information of a particular respondent which helps in analyzing the data collected from them. The demographic questions in our survey covers birth year, gender identity, zip code(location), employment status, annual household income and where they would regularly purchase cups.
The educational material section available in the survey describes the various product attributes of the plastic cup images available in the conjoint survey. The intent of this section is to familiarize the respondents with the content of the survey.
The product attributes mentioned in the education section are:
- Quantity: The number of cups present in a package.
- Volume & Dimensions: Both volume and dimensions are defined along with references for a better understanding of what the sizes mean in real life.
- Price: The list price (without taxes) that the consumer will have to pay for a package of cups in the store as well as the price per cup.
- Opacity: Refers to the ability to see through the cup.
- Logos: Whether or not the cup has the OMAO logo on it.
- Appearance: Four different types of images are used in the survey based on the combination of logo and opacity of the cups.
- Material : Refers to the material the cup is made of. The two choices are ‘Regular plastic’ and ‘Sustainable plastic’ based on the type of material.
The following attributes along with respective levels have been used in the conjoint questions for our survey:
| Attribute | Level |
|---|---|
| Opacity | No (Translucent), Yes (Opaque) |
| Logo | No, Yes |
| Quantity | 25, 50, 75, 100 |
| Volume | 9 oz, 16 oz |
| Plastic Material | Regular, Sustainable |
| Price | $0.05, $0.10, $0.15, $0.20, $0.25, $0.30 |
Changes from Pilot Survey
After completing the analysis on our pilot survey, we discovered that we would need at least 600 people to complete our final survey in order to receive valuable data. Since it may be difficult to get 600 respondents, the team worked together to narrow down some of the attributes and levels. Previously, the options for logos included no logo, blue logo, or green logo. In the final survey, we simplified this by taking out the option of color and changing the levels to logo or no logo. This change decreased the number of respondents to 400, which was more achievable (we got 361 before filtering out the bad data).
The team also received other helpful feedback from classmates that took the pilot survey. A few suggestions were about the survey mechanics such as including an ending page and getting rid of the “contact us” line at the bottom of the survey. But some of our classmates had very insightful feedback about the structure of our survey. For example, we had pictures of cups with a logo that said “I am not plastic” but then labeled the material as plastic. Since this caused confusion for a number of people, we decided to change the logo on the cups to be a more generic OMAO logo. The change from multiple colors of logos to just one, also decreased the number of respondents needed, as noted above. Additionally, we had our prices listed in terms of packs of cups which was difficult for some people to compare to the other choices because the quantity of each package varied. To solve this issue, in our updated survey we included the price per cup as well as the price per package of cups. Lastly, we added a question about how many cups the respondent uses per month in case we needed it for the analysis.
The distinct levels for each attribute mentioned above are defined in values relevant to the real life scenario of buying plastic cups. Our survey consists of eight conjoint questions per respondent with each question having a set of three different alternatives to choose from. The three alternatives are displayed as three distinct images with corresponding set of product attribute details.
Sample Choice Question
Data Analysis
Sample Description
In total, we had 361 respondents to our survey. After cleaning the data, however, we had 181 responses that we could use. By analyzing the demographic information from the respondents, we were able to find some interesting statistics about the sample size. Of the 181 respondents, 51% of them were women, 45% were men, 3% are gender non-conforming, and 1% preferred not to say. By asking about their employment status, we found that 48% of the respondents are employed full-time, 21% are students, 15% are unemployed, 10% work part-time, and 6% put “other.” Additionally, 62% of our sample were above the age of 25, which was a demographic we looked at because we thought there would be a split between views on environmentalism above and below 25 years old. A summary of all the demographic information for the respondents, including how many cups they use each month and where they buy their cups, is outlined in the table below.
| Demographic | Population A | Population B | Population C | Population D | Population E |
|---|---|---|---|---|---|
| Age | 38% (under 25) | 62% (25 and above) | NA | NA | NA |
| Gender | 51% (female) | 45% (male) | 3% (non-conforming) | 1% (prefer not to say) | NA |
| Employment | 48% (full time) | 21% (students) | 10% (part time) | 15% (unemployed) | 6% (other) |
| Cups Used / Month | 80% (0 to 25) | 16% (26 to 50) | 2% (51 to75) | 2% (over 75) | NA |
| Where They Purchase Cups | 88% (grocery stores) | 8% (convience stores) | 4% (online) | NA | NA |
| Household Income | 17% (under $15k) | 26% ($15k - $50k) | 31% ($50k-$100k) | 22% (above $100k) | 4% prefer not to say |
Data Cleaning
- We created survey time columns for each of the three pilot surveys.
- We combined the data from each survey.
- We filtered out respondents that do not use plastic cups.
- We filtered out respondents that did not answer all of the choice questions as they did not show enough care to finish the survey, and therefore, may not have cared very much about making accurate choices for the questions that they did answer.
- We filtered out respondents that answered the survey in the 10th percentile for speed as there is a chance they did not pay attention to the questions being asked or the answers they were choosing.
- We filtered out respondents that answered the attention check question incorrectly because this means that they were either not paying close attention to the question or did not understand the survey.
- For our subgroup analysis, in which we compared Gen Z (people 25 and under) with the rest of the population, we had to filter by age. A new column was made in the data subtracting their year of birth from 2021. Any yields 25 and under were categorized as Gen Z or Group A while those over 25 were categorized as Group B. We also filtered out the one respondent that responded “prefer not to say” to the age question.
Modeling
The following three types of models were made:
- Simple Logit Model
- Mixed Logit Model
- Logit Model with Sub-Groups
All models were developed according the following baseline utility:
\[u_j = \beta_1 x_j^{\mathrm{price}} + \beta_2 \delta_j^{\mathrm{opacity\_yes}} + \beta_3 x_j^{\mathrm{quantity}} + \beta_4 \delta_j^{\mathrm{plastic\_sustainable}}+ \beta_5 \delta_j^{\mathrm{logo\_yes}} + \beta_6 \delta_j^{\mathrm{volume16}} + \epsilon_j\]
In the model, the following is the meaning for each attribute:
- Price: Cost per cup (continuous)
- Opacity_yes: Whether or not the cup is opaque (discrete)
- Quantity: Number of cups (continuous)
- Plastic_sustainable: Whether or not the material was sustainable.
- Logo_yes: Whether or not there was a logo on the side of the cup (discrete)
- Volume_16: Whether or not the cup was 16 ounces. (discrete)
Simple Logit Model
Based on our simple logit model, we were able to get the following coefficients.
| Attribute | Coefficient | Standard Error |
|---|---|---|
| Price | -10.8475321 | 0.4733620 |
| Opacity_yes | -0.0654425 | 0.0684628 |
| Quantity | -0.0029867 | 0.0012279 |
| Plastic_sustainable | 0.8575108 | 0.0712448 |
| Logo_yes | -0.0990601 | 0.0677265 |
| volume16 | 0.6193382 | 0.0691597 |
The uncertainty relative to the coefficients is very minimal. Based on the coefficients, price has an expected huge impact on the model and as it increases, the overall utility will decrease. Plastic material has a large impact to the model as well, in which having a sustainable plastic cup would increase the utility. Additionally, having a 16 ounce cup over a 9 ounce cup increases utility. In terms of the opacity, logo, and quantity, the impact on the model is low. An increase in quantity would decrease utility. Having an opaque cup and a cup with a logo would also decrease utility.
Mixed Logit Model
We modeled the survey data as a mixed model as well, in which we tried to determine which parameter could be fixed and which could vary randomly when in a WTP space. Based on assumption, we set all attributes to vary randomly. When initially testing the model, we considered all parameters as normally distributed. Based on those results, quantity had a very small standard deviation (\(\sigma\)) value, and we decided to consider it as fixed. The standard deviation (\(\sigma\)) and mean (\(\mu\)) coefficients below reflect that change.
| Attribute | Coefficient | Standard Error |
|---|---|---|
| Price (\(\mu\)) | -13.3105155 | 1.2039098 |
| Price (\(\sigma\)) | 5.9866335 | 2.0396237 |
| Opacity_yes (\(\mu\)) | -0.0974191 | 0.0871198 |
| Opacity_yes (\(\sigma\)) | 0.6331842 | 0.4720495 |
| Quantity | -0.0034410 | 0.0014587 |
| Plastic_sustainable (\(\mu\)) | 0.9895653 | 0.1131969 |
| Plastic_sustainable (\(\sigma\)) | 1.0494404 | 0.3369675 |
| Logo_yes (\(\mu\)) | -0.2295833 | 0.1430181 |
| Logo_yes (\(\sigma\)) | 0.4865615 | 0.5628729 |
| Volume16 (\(\mu\)) | 0.6188740 | 0.0928421 |
| Volume16 (\(\sigma\)) | 1.0759012 | 0.3565480 |
All of the coefficients impact the overall utility the same way as the simple logit model does.
Sub-Group Logit Model
We ran a sub-group analysis on the simple logit model design. Group A consists of respondents who are the ages 25 and below. Group B consists of respondents who are the ages above 25. Below shows the model coefficients for Group A and the difference between Group A and B.
| Attribute | Coefficient | Standard Error |
|---|---|---|
| price | -12.028 | 0.81655 |
| opacity_yes | -0.12536 | 0.11412 |
| quantity | -0.0035813 | 0.0020403 |
| plastic_sustainable | 0.95343 | 0.11681e |
| logo_yes | -0.063200 | 0.10866 |
| volume16 | 0.55521 | 0.11332 |
| price_B | 0.18122 | 0.10031 |
| opacity_yes_B | 0.90198 | 0.14274 |
| quantity_B | 0.00091109 | 0.0025573 |
| plastic_sustainable_B | -0.15741 | 0.14756 |
| logo_yes_B | -0.052856 | 0.13907 |
| volume16_B | 0.10599 | 0.14321e |
Based on these coefficients, we were able to determine the model coefficients for each group separately. Below are the average coefficients and confidence interval for each group.
Group A:
| mean | lower | upper | |
|---|---|---|---|
| price | -12.0061280 | -13.5983265 | -10.3773464 |
| opacity_yes | -0.1264245 | -0.3493062 | 0.0982887 |
| quantity | -0.0035684 | -0.0074943 | 0.0004320 |
| plastic_sustainable | 0.9512182 | 0.7195115 | 1.1808056 |
| logo_yes | -0.0651895 | -0.2782700 | 0.1453800 |
| volume16 | 0.5526245 | 0.3327869 | 0.7775665 |
Group B:
| mean | lower | upper | |
|---|---|---|---|
| price | -10.2095647 | -11.3481290 | -9.0551957 |
| opacity_yes | -0.0357011 | -0.2021341 | 0.1334643 |
| quantity | -0.0026580 | -0.0057374 | 0.0004203 |
| plastic_sustainable | 0.7949028 | 0.6200494 | 0.9717545 |
| logo_yes | -0.1173902 | -0.2865915 | 0.0510741 |
| volume16 | 0.6614456 | 0.4884781 | 0.8350924 |
Similarly to the mixed logit model, the coefficients for each group impact the overall utility the same way.
Results
Willingness to Pay
To assess which attributes that drive consumer choice, we created plots for willingness to pay. Below is the willingness to pay calculated from our simple logit model.
Opacity, quantity, and logo all had negative WTPs. However, these WTPs are very close to 0, opacity and quantity having standard errors containing 0. Therefore, opacity, quantity, and logo do not have big effects on consumer choice. The two attributes that have larger effects on consumer choice are the sustainability of the material and volume of the cup. Consumers are willing to pay an average of 7.91 cents extra per cup for them to be made out of sustainable plastic and 5.71 cents extra per cup for them to be 16 ounces as opposed to 9 ounces.
Next, we looked at the WTPs for our two subgroups, those under 25 and those over 25, to see if there are significant differences in what is driving their choices. Below are the plots for willingness to pay calculated from both of our subgroup models.
Both groups have negligible WTPs for opacity, quantity, and logo with errors containing 0. However, it seems that the under 25 group has a slightly stronger preference for translucent cups and less of an aversion to logos. The older group has a stronger preference for a 16 ounce cups and would be willing to pay 1.84 more cents per cup for 16 ounce cups than the under 25 group.
Market Simulations
Our market simulation is based off of variation in all attributes of our model. We compared our expected design with a mixture of 8 different products coming from 4 different brands. We have two brands with sustainable plastic cups and two brands with regular plastic cups. Each brand has a cup that is 16 oz. and a cup that is not. The prices varies among the levels we have outlined. The cup we are expecting to design is opaque, has a logo, is 16 oz., is sustainable, comes in a package of 50, and costs $0.20 per cup. The price chosen is relative to typical sustainable price per cups. It is to reasonably take into account an unknown production cost. The opacity and logo choice is based on OMAO planning to design an opaque white cup with a logo. The volume choice is according to the higher willingness to pay for a 16 oz. cup.
| obsID | altID | price | opacity_yes | quantity | plastic_sustainable | logo_yes | volume16 | brand |
|---|---|---|---|---|---|---|---|---|
| 1 | 1 | 0.20 | 1 | 50 | 1 | 1 | 1 | OMAO |
| 1 | 2 | 0.19 | 0 | 1000 | 1 | 1 | 0 | ecoProducts |
| 1 | 3 | 0.18 | 0 | 1000 | 1 | 1 | 1 | ecoProducts |
| 1 | 4 | 0.11 | 0 | 2000 | 1 | 1 | 0 | worldCentric |
| 1 | 5 | 0.28 | 0 | 1000 | 1 | 1 | 1 | worldCentric |
| 1 | 6 | 0.08 | 0 | 50 | 0 | 0 | 0 | solo |
| 1 | 7 | 0.08 | 1 | 50 | 0 | 0 | 1 | solo |
| 1 | 8 | 0.06 | 1 | 50 | 0 | 0 | 0 | greatValue (Walmart) |
| 1 | 9 | 0.08 | 0 | 25 | 0 | 0 | 1 | greatValue (Walmart) |
The following is a market simulation based on the scenarios above.
OMAO Market Share: 14.3%
The market share for OMAO’s cup is 14.3%. While this share is very competitive against other sustainable cup products, it is still ~10-15% less than its next highest share holders. The higher market share holders come from 16 ounce regular plastic material products produced by Great Value and Solo. In order to increase market share, decreasing the price would be effective.
The following is the market share if we decreased the price to $0.15 per cup.
OMAO Market Share: 22.3%
The market share for OMAO’s cup is now competitive with its closest market share holders. While it is not the greatest share, it carries about ~1-3% to the closest shares. While this share can be effective, there could be other ways to also make changes to the product to increase the share.
The following market share is based on changing the appearance to translucent and no logo.
OMAO Market Share: 25.3%
At $0.15 and with an appearance design change, OMAO’s cup has the highest market share while varying ~1-5% with its next highest competitors. However, the increase in market share after a design change was only ~3%, meaning the change is not necessary. The recommendation would mean changing the design to clear and without a logo, which is not what was initially desired. In terms of market adoption, price has the largest influence on consumer choice. Sustainable material also has positive influence based on WTP, therefore this is a design aspect that should not be changed.
Sensitivity
The sensitivity of each attribute was calculated based on the market scenario used in simulations. The baseline for OMAO’s product is according to the cup having a price of $0.20 per cup, the cup being opaque, the cup having a logo, the cup being sold in packages of 50, the cup being sustainable, and the cup being 16 oz.
The figure below shows plots of sensitivity to market share for each attribute.