dirk huisman advanced quant - 2011
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Event sponsored by Affinnova All copyright owned by The Future Place and the presenters of the material For more informa=on about Affinnova visit h>p://www. affinnova.com/
For more informa=on about NewMR events visit newmr.org
Advanced Quant Techniques July 14, 2011
MBC, as Easy As ABC? An introduc:on to Menu Based Conjoint
Dirk Huisman, SKIM
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Dirk Huisman Chairman | SKIM
expect great answers
MBC, as Easy As ABC? An introduction to Menu Based Conjoint
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
What is Menu-Based Conjoint?
An exercise that replicates a specific kind of choice situation by allowing consumers (respondents) to specify their desired product by selecting single features or bundled group of features. Menu-based conjoint is the family name showing the relation with other variations to conjoint analysis, a class of discrete choice models. You may also call it a build-your-own product exercise.
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
In “traditional” CBC a consumer choses among full profiles
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Traditional CBC is most suitable for “complete” products without optional features
• Consumers do intuitively choose one out of several pre-defined concepts and repeat the “shopping trip”.
• Methodology has been validated and results are calibrated to fully mimic reality
but
• This does not mimic many real life choice situations:
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Capturing real life in a fast food restaurant looks as easy as ABC Building your own product is as easy as ordering a meal at Burger King Mmmh, today I
feel for a Whopper. I mean, the
menu, with fries and Coke ..and I could go
large, it’s only $1 more!
Surprise me, they have cookies!
OK, then I’ll not take the menu, just a whopper, and a
cookie And who cares I am about to consume
2500 calories. It’s a balance day.
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Choice situations where combining items matters, require Menu Based Conjoint
• Menu optimization in fast food/branded restaurant chains
• Converging TLC markets / services: bundling • BYO computers (e.g. Dell) • Optional features pricing optimization in automotive
market • Add-on services in the financial and insurance
services industry • Mix and Match situations like in apparel
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Whopper $3.50 California W. $ 4.50
Omega3 $3.75 Chicken Deli $ 3.50
Cheddar $0.50 American cheese $ 0.75
Crispy Onions $1.50
Bacon $1.50
Curly fries $1.25
French fries $1.05
✔ ✔
✔
✔ Supersize + $
0.25
✔
Total price $ 8.50
Mimicking reality in the choice task is not complex
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Or why don’t we build our own computer, as if we’re Dell?
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
MBC sound like a great idea. Why didn’t we do it earlier?
• Computational barriers are relieved • Hundreds of ways you can configure your product • Computationally not feasible to take all of them into
account • Lack of rules to meaningfully aggregate and generalize
individual ideal points
• Recent developments make it easier (not easy) • New interest in the methodology, better estimates • Papers and methodological conferences • Commercially available software to analyze
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
• Realistic choice tasks, representative for a different class of choice situations
• Enables predictions about many items
• Valuable insights into aspects not captured by CBC • Most-often chosen combination, explicitly allowing
for interaction effects between items • Cross-effects price sensitivity and cannibalization
effects • Menu pricing and discounts
MBC is new. Is it better?
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
% =mes a single burger is purchased
Cookie Price Price discount for a menu Forecast how a price change for one or more of the menu items impacts revenues
Menu
% =mes cookies are included in an order
MBC results: valuable new insights
Estimate interaction effects between menu items, suggesting cannibalization dynamics
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
0%
5%
10%
15%
20%
25%
Tofu burger + Vitamin water
+ pecan cookie
Tofu burger + Vitamin water
+ fries
Tofu burger + Soda + fries
Tofu burger + Soda + salad
Tofu burger + Soda + muesly
yogurt
Tofu burger + Vitamin water
+ fries
Tofu burger + Fruit juice +
fries
Most chosen combinations of drink and sides when a Tofu burger is chosen
Most notably how menu items perform in conjunction
Observation of the most common combinations suggests the creation of a new menu based on Tofu burger and Vitamin water
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Challenges are primarily due to the “infancy” of the approach
• Analysis approach under development • Different methods for analyzing different approaches to MBC
and BYO are known • But we lack a golden standard or precise guidelines; the
final decision is left to the “experience” of the methodologist • Computationally intensive
• Survey challenges • Respondent fatigue in a situation of repetitive tasks needed
for collecting sufficient data point • Large sample sizes necessary for validity and precision
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Q & A
Dirk Huisman SKIM
Sue York The Future Place
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
For further information: Technical papers about MBC: Bakken, David G. and Megan Kaiser Bond (2004), “Estimating Preferences for Product Bundles vs. a la carte Choices”, Sawtooth Software Conference Proceedings, pp 123-134. Cohen, Steven H. and John C. Liechty (2007), “Have it Your Way: Menu-based conjoint analysis helps marketers understand mass customization”, Marketing Research Magazine, Fall 2007, pp 28-34. Liechty, John, Venkatram Ramaswamy, and Steven H. Cohen (2001), “Choice Menus for Mass Customization: An Experimenal Approach for Analyzing Customer Demand with an Application to a Web-Based Information Service”, Journal of Marketing Research, May 2001, pp 183-196. Rogers, Greg and Tim Renken (2003), “Validation and Calibration of Choice-Based Conjoint for Pricing Research,” Sawtooth Software Conference Proceedings, pp 209-215. Ben-Akiva, M. and S. Gershenfeld (1998), “Multi-featured Products and Services: Analysing Pricing and Bundling Strategies”, Journal of Forecasting, 17. Conklin. M., B. Paris, T. Boehnlien-Kearby, C. Johnson, K. Juhl, A. Zanetti-Polzi, K. Gustafson, B. Palmer, (2007) “Menu Based Choice Models”, ART Forum. Bryan K. Orme,,(2010) “Menu-Based Choice Modeling Using Traditional Tools”, Sawtooth Software, RESEARCH PAPER SERIES
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
contact us or follow us online!
SKIM
Dirk Huisman | Chairman [email protected] | +31 102823561
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Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
contact us or follow us online!
SKIM | Locations New York, USA Juan Andrés Tello [email protected] +1 201 963 8430 Rotterdam, NL Mini Kalivianakis [email protected] +31 10 282 3535
twi>er.com/ skimgroup
facebook.com/ skimgroup
linkedin.com/ company/skim
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Geneva, Switzerland Vicky Nef [email protected] +41 22 747 7519 London, UK Debora Corfield [email protected] +44 203 178 6910