Small Sample Quantitative Methods Conjoint Analysis

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					Small Sample Quantitative Methods
     Conjoint Analysis

        COMM 3710
        April 17, 2003
         Tim Larson
             Quantitative Techniques
Two choices when it comes to conducting quantitative

  •Collect less information across more
   individuals =large sample technique

  •Collect a lot of information from a few
  individual =small sample technique

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
• A small sample technique that quantifies people’s
  preferences or priorities when faced with the task of
  evaluating a set of products and choosing the most
  preferred alternative.

• Parallels a realistic purchase situation

• Often labeled trade-off analysis.
   – What features or benefits is a consumer willing to trade off?

• For instance, if you were going to purchase a computer,
  some of your trade-off considerations might be…
    •HD memory •Monitor Size •RAM •OS
     •Service •Software •Peripherals •Price
              Basics of Conjoint Analysis

•In real purchase situations, consumers do not make choices based
 on a single attribute like comfort or cost.

•Consumers examine a range of features or attributes and then
 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.

•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?
        Which would you choose? ___________

•Suppose you can take either a direct flight which takes three hours
or a flight that stops once and takes five hours.
         Which would you choose? ____________
       A Practical Example of Conjoint Analysis

•Seat comfort
•Duration of the flight

If we determine that these three attributes are the only
relevant attributes people use in choosing a flight, there are
potentially eight flight choices for a consumer to consider.

    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

Which would you choose? ________
If not offered, which would you choose? ________
If not offered, which would you choose? ________
                  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 flight consumer

ATTRIBUTE              UTILITY         RANGE
  $400                 61              56
  $700                  5              (61 MINUS 5= 56)

  3 hours              42              20
  5 hours              22              (42MINUS 22=20)

 Comfort seat          15               3
  extra-wide           12              (15 MINUS 12= 3)
                     Assignment 4.3
Using the Parts-Worth values in Exhibit 4.1, answer
the following questions:

   1. What is the most important feature (variable) in the
      purchase decision for this one individual and what
      is the preferred class of that feature?
   2. What feature is next in importance and what is
      the preferred class of that feature? •
   3. What are two features that have less impact on
    4.1 Hypothetical Conjoint Output for FAX Machine

                             Utility    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 speed
          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 Answers
      See Exhibit 4.1 Hypothetical Conjoint
                      Output for FAX

1. 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.
2. Print speed is next in importance, and the
  highest speed of 10ppm speed is the most
  preferred speed point.
3. Color and brand name have less impact on
  preference because the utilities are much lower
  for these features
                 (Block & Block)
                     4.2 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
                      Assignment 4.3
Using the Partsworth Diagrams in Exhibit 4.2, answer
the following questions:

1. A change in price from $499 to $699 greatly
   (increases) or (reduces) preference?
2. The “elasticity” of the color feature is
   (small/flat) or (great/steep)?
3. Which feature has the greatest elasticity?
    (Block & Block)
           FAX Example Answers
                   See Exhibits 4.2 & 4.3

1. A change in price from $499 to $699 greatly
  reduces preference, and with a price point of
  $899, preference dips even lower.
2. The “elasticity” curve for the color feature is
  flat and highly elastic while the “elasticity”
  curve for the price feature is steep and inelastic.
3. Color and Brand have the greatest elasticity,
  but the least overall preference (utility or
  partworth). Their “elasticity” curves are flat.
•The difference between highest and lowest
  utility (partworth) is an indication of the impact
  of a feature on overall preference.
          (Block & Block)
      4.3 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
1. Trade-Off or Two Factor Approach
    – Two alternatives presented
      • Rating Scales
2. Conjoint simulation using a computer
      • Lets you estimate the ideal feature combinations
      • Computer-aided Interviewing
         – Computer models used to present and compute
           conjoint analysis research.
3. Full-profile conjoint analysis
         1. Trade-Off Conjoint Analysis or
              “Two -Factor Approach”
                Paired Comparisons
       See Exhibit 4.4 Trade-Off Conjoint Matrices

– Respondents are presented with a series of
  combinations based only on pairs of features
– Requires respondent to make choices between pairs
  about every combination of features and class 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)
              Trade-Off Conjoint Matrices
        Telephone                                   Price
Print    With    Without          Print       $499      $699       $899
Speed    Handset Handset          Speed

5ppm                              5ppm
8ppm                              10ppm

              Telephone    $499           $699              $899

                 4.4 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

Reveals consumer preference for specific product configurations.

   Flight 1:   $300          5 hours        two stops     no meal
   Flight 2:   $400          4 hours        one stop      snack
   Flight 3:   $500          3 hours        direct        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?
          3. Full Profile Conjoint Analysis or
                   “Multi Factor Approach”
                  See Exhibit 4.5 - Product Descriptions in a
                          full profile conjoint analysis

•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
                Data Collection (Choice #10 on previous slide)
Data collection involves showing respondents a series of cards that
contain a written description of each and every product configuration.

 •A typical card examining the business traveler might be…

“When you next purchase a FAX machine, how likely would you be to
  choose one with the following characteristics? Please circle
  the appropriate number from 1 to 10 to indicate your feelings.”
             •No Handset

     Would never                             Would definitely
     choose this FAX                         choose this FAX
         1     2   3      4    5    6    7    8   9     10
          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.
           Conjoint Analysis Demonstration