Small Sample Quantitative Methods Conjoint Analysis

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					Small Sample Quantitative Methods
        Conjoint Analysis

        COMM 3710
      November 21, 2002
         Tim Larson
   Small Sample Quantitative Techniques
•Two choices when it comes to conducting research
  -Collect a lot of information from a few
  -Collect less information across more individuals.
•Rule of Thumb
  -The more information you collect from any single
  individual, the fewer the number of cases you will
  need in order to achieve a stable sample estimate.
• Conjoint analysis uses this rule of thumb by
  measuring a phenomenon systematically in
  every possible light; hence, the statistical
  stability without the large, expensive
       Scales and Use of Sophisticated
           Analytical Procedures
• If you can assume that the differences in the way
  people standardize their perceptions and the
  widths of the intervals will average themselves out
  --in other words, those who are more stringent
  balance out those who are less stringent-- then you
  can treat scales as though they were ratio scales
  and calculate averages using the more powerful
  analytical quantitative statistical procedures.
• For most marketing and B2B market research
  purposes, attitude scales are used as though they
  are ratio- and equal-interval scales.
                    Conjoint Analysis

• A technique that quantifies people’s preferences or
  priorities when faced with the task of evaluating a set of
  products or services and choosing the most preferred
• Often labeled trade-off analysis
• Parallels a purchase situation
   – Product purchase example
       • Computer brands and descriptors:
           –   HD memory
           –   monitor size
           –   RAM
           –   OS
           –   service
           –   software
           –   peripherals
                      Conjoint Analysis

•Important first step in conjoint analysis is to determine the
 appropriate features to test for. (Qualitative research)

•Second step is to determine an appropriate number of
realistic levels (attribute configurations) for each feature.
                  Basics of Conjoint Analysis

   •Suppose you wanted to book an airline flight and you had a choice
   of spending $400 or $700 for a ticket. Which would you choose?

   •What if the only consideration was sitting in a regular or an
   extra-wide seat? Likely would choose the extra-wide seat.

    •Suppose you can take either a direct flight which takes three hours
     real purchase situations, consumers do Choice is clear.
•In or a flight that stops once and takes five hours. not make choices based
 on a single attribute like comfort or cost.
•Consumers examine a range of features or attributes and them
 make judgments or trade-offs to determine their final purchase
•Conjoint analysis examines the trade-offs to determine the
 combination of attributes that will be most satisfying to the customer.
            A Practical Example of Conjoint Analysis

Conjoint analysis presents choice alternatives between products/
services defined by sets of attributes.

For example:
  •Would you prefer a flight with regular seats, that costs $400
   and takes 5 hours, or a flight which costs $700, has extra-wide
   seats and takes 3 hours?

  •If, for example, we see seat comfort, price and duration
   are the only relevant attributes, there are potentially eight
   flight choices.
          Conjoint Analysis
         Airline Flight Example

Choice     Seat         Price     Duration

1          Extra-wide   $700      5 hours
2          Extra-wide   $700      3 hours
3          Extra-wide   $400      5 hours
4          Extra-wide   $400      3 hours
5          Regular      $700      5 hours
6          Regular      $700      3 hours
7          Regular      $400      5 hours
8          Regular      $400      3 hours
                  Utility or “Part-worth”
•Utility is defined as a number which represents the value or relative
“worth” consumers place on an attribute or “part.”.
•A low utility indicates less value; a high utility indicates more value.

         Hypothetical utilities for an individual consumer

ATTRIBUTE              UTILITY         RANGE
  3 hours              42              20
  5 hours              22              (42MINUS 22=20)

 Comfort seat          15               3
  extra-wide           12              (15 MINUS 12= 3)

  $400                 61              56
  $700                  5              (61 MINUS 5= 56)
                  CHOICE SIMULATIONS
                    Using the Computer

•Reveals consumer preference for specific products defined by the

   Flight 1:   $300          5 hours        two stops     meal
   Flight 2:   $400          4 hours        one stop      snack
   Flight 3:   $500          3 hours        direct        no meal

Possible Questions:
 • Will a price change of $50 influence the consumer’s choice?
 •Would the consumer be willing to pay $50 more if s/he got a meal?
                               Data Collection
Data collection involves showing respondents a series of cards that
contain a written description of the product or service.

 A typical card examining the business traveler might look like
 the following:
   “On your next business flight overseas, how likely would you be to
    choose a flight that has all the following characteristics? Please circle
    the appropriate number from 1 to 10 to indicate your feelings.’
                •One stop en route
                •Extra-wide seats
                •Departure time: before 8:00 AM
                •“Double” mileage points
                •$200 fee to change ticket
      Would never                              Would definitely
       choose this flight                      choose this flight
        1 2       3     4    5     6     7   8    9    10
               FAX Example
       See Exhibit 5.4 Hypothetical Conjoint
           Output for FAX that follows.

•Price is the most important feature in the
  purchase decision for this one individual, and
  the lowest price of $499 is the most preferred
  price point.
•Print speed is next in importance, and the highest
  speed of 10ppm speed is the most preferred
  speed point.
•Color and brand name have less impact on
  preference because the utilities are much lower
  for these features
                 (Block & Block)
        5.4 Hypothetical Conjoint Output for FAX Machine
                        Partsworth      Difference   Relative Weight
Paper cutter
          Yes                     .6
          No                     .01        .59        18%
Telephone handset
          Yes                    .5
          No                     .1         .4          12
Answering machine
          Yes                    .8
          No                     .5         .3          9
Print speech
          5ppm                   .3
          8ppm                   .9
          10ppm                 1.0         .7          21
Brand name
          Sharp                  .4
          Panasonic              .5
          Brother                .5
          HP                     .6         .2          6
          Black                  .1
          Putty/Beige            .2
          Gray                   .2         .1          6
          $499                  1.5
          $699                   .9
          $899                   .5         1.0         31
                        Total Utility      3.29        100%
                        FAX Example
                  See Exhibits 5.5 & 5.6 that follow.

•Partsworth diagrams for hypothetical FAX example
   – A change in price from $499 to $699 greatly
     reduces preference, and with a price point of
     $899, preference dips considerably lower.
   – Difference between highest and lowest utility is
     an indication of the impact of this feature on
     overall preference.
   – Note that the “elasticity” of the color feature is
     small and flat while price elasticity is steep.
      (Block & Block)
                     5.5 Partworth Diagrams for Hypothetical FAX Example

                                                                               Black    Beige   Gray
Yes            No                      Yes              No
  Paper Cutter                         Answering Machine                               Color

                                    Sharp Panasonic Brother Hp
 Yes           No                                                              $499      $699    $899
                                          Brand Name
 Telephone Handset                                                                      Price

                                        5ppm     8ppm     10ppm
                                            Print Speed
      5.6 Partworths for FAX Machine

10                           9
 0   Paper     Teleph one   An swering    Print    Brand   Color    Price
     Cu tter    Handset      Machine      Sp eed   Name
  Alternative Measurement Techniques in
             Conjoint Analysis
• The paired comparison
   – Two alternatives presented
      • Rating Scales
          – Added to paired comparison to get more data
• Conjoint simulation using a computer
  – Lets you estimate the ideal feature
      • Computer-aided Interviewing
         – Computer models used to present and compute conjoint
           analysis research.
• Full-profile conjoint analysis
            Trade-Off Conjoint Analysis or
               “Two -Factor Approach”
                 Paired Comparisons
See Exhibit 5.8 Trade-Off Conjoint Matrices that follows.

 – Respondents are presented with a series of
   combinations based only on pairs of features
 – Requires respondent to make choices about every
   combination of features and levels.
 – This intense data collection adds to the stability of the
   utilities for even small samples.
 – Works best when features do not interact with one
   another, or in others words, the preference or utility of
   one variable compared to another does not depend on
   the circumstances of a third feature.
 – Computer model analyzes the data to get utility values
 (Block & Block)
                 5.8 Trade-Off Conjoint Matrices
          Telephone                                   Price
  Print    With    Without            Print     $499      $699   $899
  Speed    Handset Handset            Speed

  5ppm                                5ppm      3
                                      8ppm      2
  8ppm     3          4               10ppm     1         4

  10ppm    1          2
                          Telephone   $499            $699       $899
These are merely
examples of possible
responses.                With        1               3          4
                          Without     2
            Full Profile Conjoint Analysis or
                    “Multi Factor Approach”
                  See Exhibit 5.9 - Product Descriptions in a
                    full profile conjoint analysis that follows.

•Respondents are presented with a complete profile of
  alternative products, each alternative profiled in terms
  of information for each and every feature of interest.

•Rather than pairs of features, in full profile CA the
  individual is confronted with many alternatives for
  which s/he must consider all the various features before
  indicating a rank-ordered preference among them.

•Using computers to model and crunch the data, full-
  profile CA is the dominant method used today.
(Block & Block)
   Product Description in a Full Profile Conjoint Example
Card   Print Speed         Handset              Price
1      5ppm                Yes                  $499
2      5ppm                Yes                  $699
3      5ppm                Yes                  $899
4      5ppm                No                   $499
5      5ppm                No                   $699
6      5ppm                No                   $899
7      8ppm                Yes                  $499
8      8ppm                Yes                  $699
9      8ppm                Yes                  $899
10     8ppm                No                   $499
11     8ppm                No                   $699
12     8ppm                No                   $899
13     10ppm               Yes                  $499
14     10ppm               Yes                  $699
15     10ppm               Yes                  $899
16     10ppm               No                   $499
17     10ppm               No                   $699
18     10ppm               No                   $899
           Conjoint Analysis Demonstration
          Summary Conjoint Basics
• Involves presenting respondents with alternative
  choice situations and having them rank the
• Computer model “decomposes” these preferences
  by analyzing what features have been consistently
  present or traded-off in the way choices were
• Output of model is a set of numerical values
  associated with every feature and feature level,
  which portrays the relative importance of each to
  the individual.

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