Introduction to Choice-Based Conjoint (CBC) Copyright Sawtooth Software, Inc.
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Transcript of Introduction to Choice-Based Conjoint (CBC) Copyright Sawtooth Software, Inc.
Conjoint Methods: Card-Sort Method (CVA)
Using a 100-pt scale where 0 means definitely
would NOT and 100 means definitely WOULD…
How likely are you to purchase…
Coke
6-pack
$1.89
Your Answer:___________
Conjoint Methods: Pairwise Method (ACA or CVA)
Which would you prefer?
Coke Pepsi
6-pack 8-pack
$1.89 $2.29
Strongly Prefer Strongly Prefer
Left Right
1 2 3 4 5 6 7 8 9
Comparing the Methods (cont.):
Traditional Card Sort:
– Respondent task is not as realistic as CBC
– Ranking or ratings typically provide enough information to compute utilities (preferences) for each individual
– Usually only compute Main Effects (no interactions)
Comparing the Methods (cont.):
Pairwise Presentation:
– Respondent task is often not as realistic as CBC
– Ratings typically provide enough information to compute utilities (preferences) for each individual
– Usually only compute Main Effects (no interactions)
Comparing the Methods (cont.):
Choice-Based Conjoint Pros:
– Making choices in CBC questions is similar to what buyers do in the marketplace
– CBC can include a “None” option, so respondents who have no interest in purchasing can opt out of the question
– Because we can analyze results by pooling respondent data, CBC permits measurement of Main Effects AND Interactions. More overall parameters can be estimated.
Comparing the Methods (cont.):
Choice-Based Conjoint Pros (cont.):
– Because we can pool respondent data, each respondent can answer as few as just 1 question
– Respondents can answer at least up to 20 choice questions with high reliability
– Randomized designs permit showing respondents all combinations of levels and are quite efficient
– Particularly well suited to pricing studies
Comparing the Methods (cont.):
Choice-Based Conjoint Cons:
– Choices are inefficient: they indicate only which product is preferred, but not by how much
– Aggregate models assume respondent homogeneity, which may be inaccurate representation for a market (but Latent Class analysis and new developments in Bayesian estimation techniques help resolve this issue)
– Usually requires larger sample sizes than with CVA or ACA
Comparing the Methods (cont.):
Choice-Based Conjoint Cons (cont.):
– Tasks are more complex, so respondents can process fewer attributes (early academics recommended six or fewer, but in practice it seems respondents can evaluate a few more than that if the text is concise and the tasks are laid out well)
– Complex tasks may encourage response simplification strategies
Comparing the Methods (cont.):
Analyzing the Data:
– ACA: Ordinary Least Squares regression (OLS) or Hierarchical Bayes (HB)
– CVA: OLS (ratings), Monotone regression (rankings) or Hierarchical Bayes (HB)
– CBC: Counting analysis, Multinomial Logit, Latent Class, or Hierarchical Bayes (HB)
– Adaptive CBC (ACBC): Hierarchical Bayes (HB), Monotone regression
Main Effects Versus Interactions
Main Effects:
- Isolating the effect (impact) of each attribute, holding everything else constant
Assume two attributes:
– BRAND: Coke, Pepsi, Store Brand
– PRICE: $1.50, $2.00, $2.50
Main Effects Versus Interactions (cont.):
Hypothetical Main Effects Utilities:
Interpretation: Across all Interpretation: Across all brands (holding brand brands (holding brand constant), $1.50 is worth 80 constant), $1.50 is worth 80 points, etc.points, etc.
Levels Utilities
Coke 50
Pepsi 30
Store Brand 10
$1.50 80
$2.00 40
$2.50 10
Main Effects Versus Interactions (cont.):
We can add the main effect utilities together and infer the preference for each brand at each price. But this assumes the same price function for each brand.
$1.50 $2.00 $2.50
Coke 50 + 80 = 130 50 + 40 = 90 50 + 10 = 60
Pepsi 30 + 80 = 110 30 + 40 = 70 30 + 10 = 40
Store Brand 10 + 80 = 90 10 + 40 = 50 10 + 10 = 20
Main Effects Versus Interactions (cont.):
This may not be an accurate representation of how price changes affect preference for each brand. Perhaps price changes have a different impact depending on the brand. That would imply an interaction.
Main Effect Price x Brand Curves
020406080
100120140
$1.50 $2.00 $2.50
Price
Uti
lity
Coke
Pepsi
Store Brand
Main Effects Versus Interactions (cont.):
CBC counts the percent of times each brand/price combination is chosen. Each cell in the grid above is directly and independently measured (two-way interaction).
$1.50 $2.00 $2.50
Coke .58 .50 .41
Pepsi .46 .32 .23
Store Brand .31 .10 .02
Main Effects Versus Interactions (cont.):
The Store Brand is more price sensitive to changes in price compared to Coke and Pepsi. Coke buyers are most loyal in the face of price changes.
CBC Brand x Price Interaction
0%
10%
20%
30%40%
50%
60%
70%
$1.50 $2.00 $2.50
Price
Ch
oic
e P
rob
ab
ilit
y
Coke
Pepsi
Store Brand
Main Effects Versus Interactions (cont.):
There are many other kinds of interactions besides Brand x Price:
Preference for
color depends
upon the car
Interaction: Cars and Colors
0%
10%
20%
30%
40%
50%
60%
70%
Black Red Blue
Color
Ch
oic
e P
rob
abili
ty LincolnContinental
Mazda Miata
Honda Accord
Sawtooth Software’s CBC Systems
• Windows- or Web-based computer-administered interviews or paper surveys
• Capacity: 30 attributes with up to 250 levels each (with Advanced Design Module)
• Experimental design produced automatically
• Prohibitions between attribute levels can be specified
• Fixed designs can be specified
• Choice sets can include a “none” or “constant” option
• Data analyzed automatically by counting or multinomial logit, optional modules for Latent Class and HB
• Market simulator included
The CBC System: Advanced Modules
• Paper and Pencil Module
– Assists in creating and analyzing data for paper and pencil interviews
• Latent Class Segmentation Module
– Detects and models market segments
– Helps relax the assumption of homogeneity, but still does not achieve individual-level data
– Permits specification of linear terms, and respondent weighting
• Hierarchical Bayes Analysis CBC/HB
Advanced Design Module
• Advanced Design Module:
– Support “brand-specific attribute” designs and estimation (some researchers refer to these as “true” discrete choice designs)
– More than one “Constant Alternative” (None) option
– Expanded number of attributes to accommodate brand-specific attribute designs (up to 30 attributes)
– Ability to conduct/analyze partial-profile experiments
Why Latent Class and HB?
• To reduce the Red Bus/Blue Bus (IIA) Problem, one must account for:
– Substitution effects
– Differential cross-elasticities
– Differential self-elasticities
Aggregate Logit
• Assume an aggregate logit solution where:– Utility (Train) = Utility (Red Bus)
On any given day, difficult to predict which way any one respondent will travel to work.
Resulting in the following aggregate shares:
– Train 50%; Red Bus 50%
Aggregate Logit:
• Assume we add another alternative where:– Utility (Train) = Utility (Red Bus) = Utility (Blue Bus)
Again, difficult to predict which way any one respondent will travel to work.
• Train 33.3%; Red Bus 33.3%; Blue Bus 33.3%
• Net Bus ridership increased from 50% to 66.7% by offering a bus of a different color
Two-Group Latent Class Solution:
• Left Half of Room– Strongly Prefer Buses
• Right Half of Room– Strongly Prefer Trains
In aggregate, it still appears that Utility (Bus) = Utility (Train)
Two-Group Latent Class Simulation:
• Now offer both Red and Blue buses
• Net Bus ridership still 50% (no Share Inflation)
Capturing heterogeneity has resulted in differential substitution effects
Differential Cross-Elasticity under Latent Class
• Now raise price of Blue Bus
– Many Blue Bus riders shift to Red Buses
– Train ridership unaffected
Capturing heterogeneity has revealed differential cross-elasticity
Differential Elasticity under Latent Class
• Assume:
– Train riders = Not price sensitive
– Bus riders = Very price sensitive
Differential Elasticity under Latent Class
• If raise Train price
– Few train riders shift to buses
• If raise Red and Blue bus prices
– Many bus riders shift to trains
Capturing heterogeneity has captured differential elasticities
Conclusions
• Capturing heterogeneity under Latent Class or HB
– Reduces Red Bus/Blue Bus problem
– Automatically accounts for differential substitution, elasticities and cross effects with simple main-effects models
• If those effects are due to differences in preferences between people