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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
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
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.
Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
In “traditional” CBC a consumer choses among full profiles
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:
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.
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
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
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?
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
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?
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
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
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
Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
Q & A
Dirk Huisman SKIM
Sue York The Future Place
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
Dirk Huisman, SKIM, The Netherlands NewMR Advanced Quant Techniques, July 14, 2011
contact us or follow us online!
SKIM
Dirk Huisman | Chairman d.huisman@skimgroup.com | +31 102823561
twi>er.com/ skimgroup
facebook.com/ skimgroup
linkedin.com/ company/skim
youtube.com/ skimvideos skimgroup.com
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 j.tello@skimgroup.com +1 201 963 8430 Rotterdam, NL Mini Kalivianakis m.kalivianakis@skimgroup.com +31 10 282 3535
twi>er.com/ skimgroup
facebook.com/ skimgroup
linkedin.com/ company/skim
youtube.com/ skimvideos skimgroup.com
Geneva, Switzerland Vicky Nef v.nef@skimgroup.com +41 22 747 7519 London, UK Debora Corfield d.corfield@skimgroup.com +44 203 178 6910
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