Executive Summary
During a typical conjoint study, participants are asked to rate a set of potential products or choose between sets of potential products. Participants are paid for simply completing the task. Recent work in experimental economics suggests that incentives should be aligned with desired behaviors.
In this conjoint study, researchers tell one half of the participants that they will be paid for completing a choice task and the other half that they will have to live with their choices. Using Chinese dinner specials as the context, the authors conduct a field experiment in a Chinese restaurant during dinnertime. During the first part of the study, both sets of participants choose either one of three meals or no meal a total of 12 times. Then, participants from the second group randomly select a number between 1 and 12, and they have to pay for and eat the preferred meal from the choice set that matches their random number.
In the second part of the study, all participants choose 1 of 20 meals or no meal. The selected meal is cooked and served at the end of the study. Participants from the second group receive the meal from the first or second part of the study, depending on a random coin flip, plus $10 minus the price of their meal. The first group receives the meal from the second part plus $10 minus the price of their meal.
The study uses the choices made in the first part to estimate individual-level preference functions (partworths), which are used to predict which meal is chosen in Part 2 of the study. A naive model would predict the meal 4.7% of the time. Using the first group’s partworths, the authors forecasted the participants’ choice 27% of the time. Using the second or incentive-aligned group’s partworths, the authors forecasted the participants’ choice 48% of the time, and the authors forecasted the participants’ top two choices 59% of the time.
In addition, the authors found that there were marked differences between the aggregate preference estimates for both groups. In particular, the incentive-aligned group was more price sensitive and exhibited different heterogeneity patterns, some of which can be explained through social desirability biases.
According to one estimate, between 90% and 95% of new consumer products fail. The authors conjecture that a majority of new products fail because their sponsors do not understand the true preferences of the target market. In addition, pricing, placement, and advertising decisions that are based on a poor understanding of consumer preferences are haphazard at best. The authors anticipate that incentive-aligned conjoint leads to significantly improved preference estimates and better marketing decisions.
Biography
Min Ding received his doctoral degree in marketing in 2001 from the University of Pennsylvania and his doctoral degree in molecular, cellular, and developmental biology in 1996 from Ohio State University. He is Assistant Professor of Marketing at the Smeal College of Business Administration at Pennsylvania State University at University Park. His research focuses on two areas: (1) the improvement of various marketing practices in life-science-related industries, especially those related to developing innovative new drugs, and (2) psychology–economics interfaces, especially those related to marketing, that commonly employ a behavioral–analytical approach and experimental economics. He has published and has forthcoming articles in prestigious journals such as Management Science, Journal of Marketing Research, and Journal of Biological Chemistry, among others.
Rajdeep Grewal received his doctoral degree in 1998 from the University of Cincinnati and is Assistant Professor of Marketing at the Smeal College of Business Administration at Pennsylvania State University at University Park. His research focuses on modeling strategic marketing issues and has been published or is forthcoming in prestigious journals such as Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of Consumer Psychology, and MIS Quarterly, among others. He has received several awards for his research, including a competitive grant from the Procter & Gamble Market Innovation Research Fund for his dissertation and the 2003 Young Contributor Award from the Society of Consumer Psychology for his 2003 article in the Journal of Consumer Psychology. He was in the 2003 list of the Marketing Science Institute’s Young Scholars (individuals who received their doctoral degree after 1995 are selected on the basis of research productivity in top-tier marketing journals).
John Liechty is Assistant Professor of Marketing and Statistics at Pennsylvania State University. He received his doctoral degree in mathematical statistics form Cambridge University. His research interests are primarily in the area of developing Bayesian statistical methods that can be used to gain new insights into problems in business and marketing. Some of his interests include developing models and methods for obtaining empirical demand functions that accurately predict purchase behavior. He is also interested in developing models for path behavior and developing models of high-frequency eye movements, with the hope of obtaining a better understanding of the cognitive process that underlies the ability to turn visual stimulus into knowledge. He has written articles that have been published or are forthcoming in a number of academic journals, including Journal of Marketing Research, Marketing Science, Biometrika, and Psychometrika.
J Marketing Research, Volume 42, Number 1, February 2005
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