Choice modelling

When launching a new product (or improving old), want to see how it will impact on market. Need to be able to model effect of each change on range of similar products. Do this with choice modelling, where people are given different scenarious and asked to choose which product they would buy.

Design of experiment

Ideally want design to be orthogonal (effects uncorrelated) and balanced (equal sample sizes per combination) – but often not possible with reasonble number of runs (%lt; 40) per person (especially when including interactions). Use %mktruns and %mktdes SAS macros to help.

In real-life, main effects explain 70-90% of variation, two-interactions 3-6%, three-way <3% – don’t need to worry much 3rd+ order interaction (and are very hard to explain!). Use prior knowledge!

Analysis of data

Typically analysed with multinomial logit model, where $P(c_i | C) = = exp(utility of that choice) / total exp(utility) of all choices. Has same form as proportional hazard regression with Breslow ties, so use SAS PHREG procedure to fit.

As for any regression model, test overall significance test first, then interactions/non-linearity, then individual covariates.