2 Lectures / 2 Exercises
This is a suggested curriculum for technically capable graduate students in fields such as business, marketing, economics or engineering. The purpose is to introduce students to Choice-Based Conjoint (CBC) and give them insight into the mechanics of experimental design. This program may be taught as two lectures each with a set of readings and subsequent exercises that should take about two hours each to complete.
Day 1: Intro to Conjoint Analysis and Choice-Based Conjoint (CBC)
- Presentation #1 Conjoint Analysis (Power Point Slides)
- Presentation #1 Conjoint Analysis (YouTube Video)
- Access the sample CBC survey on food preferences at a baseball game (http://www.sawtoothsoftware.com/baseball) and complete the questionnaire. Answer the questions realistically, to reflect your opinions and preferences. At the end of the interview, the website displays how often you chose each food item, each wait time, and each price level. It also shows results for all respondents who have completed the survey to this point.
- Which variable has more average impact on respondents’ choices, wait time or price? How did you come to this conclusion?
- Examine the demand curve table (two-way counts, food item x price) and line chart displayed for the total sample, showing how often all respondents chose each food item at each price. Using the log-log regression method of estimating price elasticity, compute the price elasticity of demand for each food item.
- Finally, referring to the two-way counts table (food item x price) and assuming that the prices of all other food items remain constant, which price should be set for each food item to maximize its relative revenue? (Hint: relative revenue is computed as relative demand x price). What other aspects would need to be considered if the goal were to set prices to maximize profit?
- A Short History of Conjoint Analysis (2009)
- Managerial Overview of Conjoint Analysis (2009) Student Reading
- Understanding the Value of Conjoint Analysis (2009) Student Reading
- History of Sawtooth Software's CBC Program (2011)
- Conjoint Analysis: How We Got Here and Where We Are--An Update (2004)
Day 2: Choice-Based Conjoint (CBC)
- Presentation #2 Choice-Based Conjoint (Power Point Slides)
- Presentation #2 Choice-Based Conjoint (YouTube Video)
Create a Choice-Based Conjoint (CBC) survey design by selecting two attributes, each with three levels. The first attribute should be three brands of a product or service (e.g. Coke, Pepsi, Sprite). The second attribute should have varying price levels (e.g. $1.00, $1.35, $1.70). Choose a product category that interests you with realistic prices that cover a fairly wide range. Create an experimental design plan with nine choice tasks (questions), wherein each task offers the respondent two concepts (products) to choose from.
Create a written CBC questionnaire (either electronically, or using index cards). An example of a choice task is as follows:
First, create nine product concepts (all possible combinations of the two attributes). These nine concepts form the left-side concept within each choice task. Create the second (right-hand) concept for each of these nine tasks as a "shift" of the product concept on the left. For example, if the product on the left is represented as (2,1) (Level 2 of the first attribute and Level 1 of the second attribute), we shift (increment) the levels by 1, resulting in the new concept (3,2) (Level 3 of the first attribute and Level 2 of the second attribute) to display on the right. To shift level 3, we revert back to level 1.
Record the design using the table below, filling in the remaining cells (we have provided the first and last concept specifications).
- Administer the questionnaire to a few individuals. Each person should choose one of the concepts in each of the nine choice tasks.
Use the table below to record the summary information for all interviews and estimate the choice probability for the brands and prices (main effects):
- Chart the choice probabilities for each of the brands and prices. Interpret the results.
- What would happen with the results with many more respondents? What would happen if you included a "None of these" selection in each choice task? How would the questionnaire and design be better or worse if you included all three brands in each choice question?