Introduction to MaxDiff Scaling of Importance - Parametric Marketing Slides

An Introduction to MaxDiffWebinar: Tuesday August 24th, 2010

© Parametric Marketing LLC 2010Client/Parametric Confidential

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Agenda

What is MaxDiff?

Why all the fuss?

Problems with Ratings Scales, and why MaxDiff is better

Fielding and Analyzing MaxDiff questions

Getting started


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What is MaxDiff?

Maximum Difference Scaling (MaxDiff) is a way of evaluating the importance (or preference) of a number of alternatives

It is a discrete choice technique: respondents are asked to make simple best/worst choices

Maxdiff has the advantage that it is very simple for the respondent, but gives extremely rich information to the researcher


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But Wait! I can Do That Without MaxDiff!

Traditionally, Marketing Research has used ratings scales to determine importance or preference, like this:

There seems to be so much more information here. So why not just use ratings scales?


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The Dark Secrets of Importance Ratings Scales

Despite their popularity, ratings scales have several significant flaws that researchers are often unaware of, including:

Scale-use bias Poor discrimination and comparison Poor predictive capability Cultural variance

Let’s look at a some of these issues

For a good overview, see “Testing Alternatives to Importance Ratings”, Chrzan and Golovashkina, 2007


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Scale Use Bias

Are these respondents really different in their preferences?


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Ratings Scales and the Lack of Constraints

A big problem with traditional ratings scales is that they do not force the respondent to make a choice. Often this can mean that our data is meaningless.

Consider the following question:

Believe it or not, we once saw almost exactly this question fielded in a study. Please don’t do this!


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The Advantages of MaxDiff Methods

OK! I am convinced that traditional ratings scales have many problems. But what about MaxDiff?

A well-designed Maxdiff exercise has the following properties:

It is easy for respondents It is culturally invariant (as “most” and “least” are easily translated and

have little room for interpretation) It forces a trade-off – respondents cannot just say everything is ‘very

important’ There is no scale bias The data can be very powerful for predictive and clustering purposes It is robust for testing a ‘laundry list’ of unalike things


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MaxDiff Questions

In its simplest form a MaxDiff question is just a list of alternatives, with the respondent being asked to identify the Most/Least (or Best/Worst) pair: i.e. the ones with the ‘Maximum Difference’

For a small number of alternatives, asking a single question can suffice


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MaxDiff with Multiple Questions

When there are more alternatives we will want to ask each respondent multiple MaxDiff questions, with different combinations of alternatives in each ‘task’

The number of tasks shown depends on the total number of alternatives, and the number shown per task. Specialist software is typically used to design the tasks

e.g. SPSS ORTHOPLAN, Sawtooth


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Analyzing the Results

There are three major options for analyzing the results of a MaxDiff exercise, each with its own strengths and weaknesses:

Count Analysis: Simply tallying the number of times each alternative is chosen as ‘Most’ or ‘Least’ important by the population Pros: Very simple, provides population-level preferences Cons: Limited usefulness for analysis beyond the basics

Logit Modeling: Using a logit model to calculate ‘utilities’ for each alternative Pros: Fast, scaled utilities can be compared and ‘share of utility’ can be

calculated for population and for segments Cons: More complex than simple counts. Aggregate-level only results

Hierarchical Bayes (HB) or Latent Class: More advanced mathematical techniques Pros: Robust techniques that produce respondent-level utilities. Results can be

used in simulators or for segmentation Cons: Require advanced software and practitioner expertise


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Interpreting the Numbers

Counts: The simple counts can be expressed as percentages, for the number of times an item was shown as ‘best’ or ‘worst’. These can be ordered and reported. Some analysts like to show the differences (i.e. the number of times something was identified as ‘best’ minus the number of times it was identified as ‘worst’

Utilities: Logit and HB methods give each attribute tested a ‘utility’. Broadly speaking this is a measure of how strongly the attribute contributes to a decision

Share of Utility: The utilities can be rescaled and converted into probabilities (using a logit transform). These can then be compared to give the relative weight of each attribute

Simulation and Segmentation: Respondent-level utilities can be further analyzed either through segmentation or simulation


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Example: A Custom MaxDiff Simulator

COGSStd. Widget $4.00Special Widget $6.00 2$ 6$ 10$ 14$ 18$ 22$ 26$ 30$ 34$ 38$ 42$ 46$ 50$ 54$ 58$ Wireless Widget $2.00 Std. Widget 1Compact Widget $3.00 Special Widget 2Cup Holder $2.00 Wireless Widget 3Rotating Badge $3.00 <-- Include Compact Widget 4Adjustable Thickness $3.00 Cup Holder 5 1 1 1 1 1 1 1 1 1Touch Sensitivity $8.00 Rotating Badge 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1Round Buttons $7.00 Adjustable Thickness 7 1 1 1Capacitive Buttons $9.00 Touch Sensitivity 8Wireless Connection $10.00 Round Buttons 9Texturing $4.00 Capacitive Buttons 10Changeable Skins $6.00 Wireless Connection 11 1 1 1 1 1 1 1 1 1 1Detatchable Probe $6.00 Texturing 12 1 1 1 1 1 1Installation Wizard $3.00 Changeable Skins 13Programmable Look $5.00 Detatchable Probe 14Extra Buttons $4.00 Installation Wizard 15 1 1High Resolution $6.00 <-- Include Programmable Look 16 1 1 1 1Slim Format $5.00 Extra Buttons 17LCD Display $8.00 High Resolution 18 1 1 1 1 1 1 1 1 1 1 1 1 1Sleek Design $1.00 <-- Include Slim Format 19 1 1 1 1 1 1 1Designer $5.00 LCD Display 20Waterproof $3.00 Sleek Design 21 1 1 1 1 1 1 1 1 1 1 1 1Spill Resistant $2.00 Designer 22Choice of Colors $4.00 Waterproof 23Help Card $2.00 Spill Resistant 24Settings Memory $3.00 Choice of Colors 25Fine Tuning $4.00 Help Card 26 1Mayonnaise $6.00 Settings Memory 27Available Cover $5.00 Fine Tuning 28 1 1 1 1 1 1 1 1 1

Mayonnaise 29 1 1 1 1 1 1 1 1 1 1Population (1 to 3): 1 (Students) Available Cover 30 1Budget $10.00Utility 28.94

Features chosen at $10 (Students):Rotating Badge, High Resolution, Sleek Design,

Budget


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Some Tips for Effective MaxDiff

Start simple: Don’t try to cram too much into your MaxDiff

Keep it Short: Even though MaxDiff is a very easy task for respondents, having too many items in a task, or too many tasks, will cause respondents to answer with less care

Make the scenario specific: A good scenario leaves the respondent with no doubt how to answer, and makes your analysis more effective


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Getting Started

MaxDiff is an exciting technique that is getting more and more popular – however, researchers need to continue moving away from traditional importance ratings and to these new techniques

While the more advanced uses of MaxDiff are incredibly powerful, don’t be intimidated by their complexity or cost – even a simple MaxDiff with Counting Analysis can be better at extracting true user importance than the use of ratings scales

Single Question MaxDiff with Logit Utilities Analysis is available now from Survey Analytics – see the following demonstration


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Parametric Marketing LLC

Parametric® provides research and analytics services to business professionals and policy makers.

We specialize in analyzing consumer behavior and advising companies on the financial implications of product, pricing, promotional and brand decisions. With our expertise in advanced research, data mining and business & financial modeling, we are uniquely equipped to help our clients address their most demanding problems. Our innovative, interactive tools bring advanced techniques – such as conjoint, discrete choice modeling and customer valuation – within the reach of real business people.

We also license our technology and provide analytics consulting to marketing research industry partners.

Parametric was founded in 2003 by Chris Robson PRC, and Scott Laing PRC

400 E Evergreen Boulevard, Suite 303Vancouver WA 98660

Phone: +1 [email protected]

Introduction to MaxDiff Scaling of Importance - Parametric Marketing Slides

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