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Marketing Letters

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01-03-2016

Predicting new service adoption with conjoint analysis: external validity of BDM-based incentive-aligned and dual-response choice designs

Authors: Nils Wlömert, Felix Eggers

Published in: Marketing Letters | Issue 1/2016

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Abstract

In this paper, we compare the standard, single-response choice-based conjoint (CBC) approach with three extended CBC procedures in terms of their external predictive validity and their ability to realistically capture consumers’ willingness to pay: (1) an incentive-aligned CBC mechanism (IA-CBC), (2) a dual-response CBC procedure (DR-CBC), and (3) an incentive-aligned dual-response CBC approach (IA-DR-CBC). Our empirical study features a unique sample of 2,679 music consumers who participated in a conjoint choice experiment prior to the market entry of a new music streaming service. To judge the predictive accuracy, we contacted the same respondents again 5 months after the launch and compared the predictions with the actual adoption decisions. The results demonstrate that IA-CBC and DR-CBC both increase the predictive accuracy. This result is promising because IA-CBC is not applicable to every research context so that DR-CBC provides a viable alternative. While we do not find an additional external validity improvement through the combination of both extensions, the IA-DR-CBC approach yields the most realistic willingness-to-pay estimates and should therefore be preferred when incentive alignment is feasible.

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Previous applications that evaluate external validity are scarce (please see Toubia et al. (2003) for an overview).

Please see, however, the discussion in Carson and Groves (2007) on (strategic) incentives in survey research in general, which may influence the results.

We only assigned respondents to the IA conditions if we had access to their names and addresses, which is why these conditions exhibit fewer observations.

Note that we ultimately refrained from carrying out the buying obligation after the survey. Rewarding only participants under incentive alignment with access to the analyzed service would have induced bias in the external validation. Instead, all respondents were appropriately debriefed and rewarded equally for their participation. While there was no other way to proceed in the present study in order to keep the experimental groups comparable, we emphasize that this procedure would raise ethical concerns when applied regularly.

We also checked measures that are more sensitive to prediction errors on large and small shares, i.e., root-mean-square error (RMSE) and chi-square (χ²). We also calculated measures of relative entropy, i.e., Kullback-Leibler (KL) divergence (Ding et al. 2011; Kullback and Leibler 1951), and uncertainty explained U² (based on individual-level RLH values; Kalwani et al. 1994). The ranking of the procedures remains largely unaffected so that we only discuss MAE and hit rates. Please refer to Appendix 3 for details.

Our WTPS measure should not be confused with the WTP for individual product features (i.e., the amount by which the price can be raised if a feature is added) which can be calculated without the no-choice option by the ratio of utility estimates.

We thank an anonymous reviewer for suggesting this step.

To ensure a high degree of comparability, we used the same wording in the non-incentive-aligned groups, stressing that service concepts should only be selected if respondents would subscribe to the respective services under real-world conditions.

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Title: Predicting new service adoption with conjoint analysis: external validity of BDM-based incentive-aligned and dual-response choice designs
Authors: Nils Wlömert
Felix Eggers
Publication date: 01-03-2016
Publisher: Springer US
Published in: Marketing Letters / Issue 1/2016
Print ISSN: 0923-0645
Electronic ISSN: 1573-059X
DOI: https://doi.org/10.1007/s11002-014-9326-x

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