Comparing Willingness To Pay Measurements To Real Purchase
Thursday, February 24, 2011| by Michaela Mora | ![]() |
| by Michaela Mora | ![]() |

I can’t emphasize enough the need for realism in price research in order to get valid results. We are well aware that in the context of a survey, respondents are likely to over- or underestimate their willingness to pay for products and services (more pronounced in certain categories than in others), so we need to strive for research designs that minimize the gap between the survey context and actual purchase behavior.
An interesting study comparing different approaches to price research, with realism in mind, was recently published in the 2011 February issue of the Journal of Marketing Research (How Should Consumers’ Willingness To Pay Be Measured? An Empirical Comparison of State-of-the-Art Approaches by Miller, Hofstetter, Khromer and Zhang).
In the article the authors present a comparative study of direct and indirect methods to measure willingness to pay to actual purchase behavior of a cleaning product. The methods examined include:
All participants who were obligated to buy in the BDM and ICBC groups, or agreed to buy in the REAL group, were sent the product and an invoice by mail, which they could pay in cash or by credit card.
The most significant finding of this exercise is that in terms of the absolute distances between an elicited willingness to pay and the actual purchase behavior, the BDM group showed the least deviation from the REAL group, followed by ICBC, OE and CBC. In other words, the BDM and the ICBC approaches elicited a more realistic response to different price points and yield results closer to those of the REAL group, which is not surprising as these approaches put participants in an actual purchase situation.
However, I was surprised to learn that OE did better than CBC. These results stay in contrast with other studies (Ding, Grewal, Liechty, 2005) and the results from a second dataset the same authors analyzed (digital compact camera) where CBC performed better than OE. The authors hypothesize that CBC is likely to perform better when a product is less unique and faces more competing products, which was not the case of the cleaning product tested. This makes sense and tells us that we should consider the product category when deciding which willingness to pay measurement approach we should use.
As an overall conclusion, the authors suggest that market researchers should consider incentive-aligned approaches such as BDM or ICBC when:
Although, the study itself has several limitations (assumptions of market monopoly, small number of CBC tasks, limited to one product category, low completion rates and relatively low understanding of the task under incentive-aligned conditions), it gives support to the idea that we are likely to get more realistic results in price research if we provide test conditions that are as close as possible to the actual purchase situation.
This is part of a series of pricing research posts that Jeffrey Henning and I are writing. The series so far:
- Comparing Willingness To Pay Measurements To Real Purchase
- Conjoint Analysis And Realism In Price Research
- Getting The Price Right Takes More Than Guesswork
- Making The Case Against The Van Westerndorp Price Sensitivity Meter
- The Van Westendorp Price Sensitivity Meter
- Monadic Price Testing: “Shh, It’s All About Price
- Estimating Willingness to Pay
To learn more about our price research service visit Price Research.

There are many things to consider if we want to write surveys that gather high quality data, including data collection method, respondent effort requested, question wording, order, format, structure, visual layout behaviors to be measured, accuracy of the elicited information, among others. Although all these issues are important, at the end of the day, what we want is to create surveys that yield results that are valid and reliable.
Validity and reliability are often discussed in the field of psychometrics, but not so much in market research, although it is assumed they are present.
Validity is concerned with the accuracy of our measurement, and it is often discussed in the context of sample representativeness. However, validity is also affected by survey design since it also depends on asking questions that measure what we are supposed to be measuring.
Most surveys often have what is called face validity, which is a matter of appearances. The questions seem like a reasonable way to obtain the information we are looking for, but are they really? There are other types of validity survey writers should strive for:
Reliability, on the other hand, is concerned with the consistency of our measurement, that’s the degree to which the questions used in a survey elicit the same type of information each time they are used under the same conditions. This is particularly important in satisfaction and brand tracking studies, as changes in question wording and structure are likely to elicit different responses.
Reliability is also related to internal consistency, which refers to the degree different questions or statements measure the same characteristic. A practical application of this concept can be found in marketing segmentation studies that try to capture psychographics and construct behavioral or satisfaction segments by asking respondent to rate a list of statements using different rating scales (e.g. agreement/disagreement; likes/dislikes; excellent/poor, etc.). In our example, if we want to identify “lovers of styling products,” the statements used to describe such consumers should provide a consistent description of this group. This can be tested by using correlations, split sample comparisons or methods such as Cronbach’s Alpha.
Validity and reliability are not always aligned. Reliability is needed, but not sufficient to establish validity. We can get high reliability and low validity. This would happen when the wrong questions are asked over and over again, consistently yielding bad information. Also, if the results show large variation, they may be valid, but not reliable. So, don’t forget to think about reliability and validity when writing your next survey and strive for reliable and valid results.

The first question I always get from clients interested in conducting a survey is about sample size. Many confuse sample size with representativeness. They are related, but not the same, particularly if convenience samples are used.
In random samples, as we increase sample size the chance each member of the target population has of being selected increases and consequently more segments of the population are likely to be represented. This is based on the assumption that we have a list with all the population members (population frame) and know their probability of being chosen. This could be the case of a customer database/list, if that’s our population of interest.
In convenience samples, the population frame becomes the pool of individuals in the sample source (e.g. online panels), which may not include all segments in the target population or only have a few members of certain segments, depending on how the sample source is built. In this case sample quotas, weighting schemes, and mixed mode data collection methods (online/phone/intercepts) are often used in an effort to reach representativeness.
Assuming that we are able to pull a representative sample of the target population by whatever affordable means are available to us, we need to give serious consideration to sample size. This is a case where size matters (pun intended). Why?
It is all about precision, tolerance for risk and cost. For samples smaller than 1000, we always have to think about how confident we want to be that estimates are within a particular range (level of confidence and risk), and how small we want that range to be (level of precision). Unfortunately, they go in opposite directions. Higher levels of confidence require greater ranges (margins of error) in small sample sizes.
For instance, we can be 95% confident that the true estimate for a variable in a sample of 400 is within +/-4.9%, however, if we want a smaller margin of error, in an attempt to gain more precision, with the same sample size, we have to sacrifice certainty and may need to accept a 90% confidence level to get a +/-4.1% margin of error. At the 95% confidence level you are more certain, but less precise as you expand the range to make sure the true value falls in it. At the 90%, you are more precise, but less certain.
If you want to get more precise estimates without sacrificing certainty in the results, then you have to increase sample size, which in turn increases research costs. As the table below shows, as sample increases the differences in margin of error across the different confidence intervals become smaller.

At the end of the day, when it comes to sample size, you need to decide what it is more important to you, certainty or precision, and what your tolerance for risk is, especially if your market research budget is small.
For more help on calculating sample size and margin of error, use our Sample Size and Margin of Error Calculators.
| by Michaela Mora | ![]() |
Written in collaboration with Kathryn Korostoft.
Published in the American Marketing Association Newsletter, 2/3/2011

In a fall 2010 study conducted by the authors on behalf of the American Marketing Association, in preparation for the 2010 Market Research Conference (AMA MRC), we surveyed 882 AMA members, about market research topics they were interested in and challenges they are facing in their market research roles.
In this article we present the results from client-side researchers, and the implications for market research agencies. By examining the results from the client-side respondents (416 of the 882 participants), the opportunity exists for market research agencies to get a sanity check on how well they are doing in terms of addressing their clients’ current priorities.
Top Challenges
The top three challenges identified by the client-side subgroup were:
These results represent an age-old issue of not enough time and not enough money, which is not surprising. If we contrast them with the lesser rated items, we begin to see that those results are more than just superficial. Some of the lesser-important items reported were:
Keep in mind these results were in the form where people could select all that applied. When forced to select only one of the items, limited market research budget stays at the top at 24%.
Top Topics of Interest
Market researchers were also asked about what topics would be of interest to them for future conferences or learning events. Using the Maximum Difference Scale (MaxDiff) approach, we tested 26 market research topics and ranked them by preference. These results show that client-side researchers were mostly interested in:
Items of less interest? Pricing research, mobile research, and ethnography (at 23rd!). Of course, these are also items that are more relevant to some industries than others, which likely explain their overall lower scores. So just as agencies promote segmentation to clients, they also need to do it themselves.
Bottom Line
Many market research agencies invest in producing webinars, white papers, and other content in order to educate clients and establish brand credibility during the sales cycle. Using these research results, they can align the topics with actual client priorities.
For more information, please contact the researchers directly:

Not long ago I received a survey from a trade association testing the appeal of market research online training courses using concept testing . They also wanted to know how much I would pay for these courses using the Van Westendorp Price Sensitivity Meter (PSM ).
In my opinion, the best approach they should have adopted in this case is Conjoint Analysis, which provides useful insights for product development, competitive positioning, brand equity measurement, market segmentation and specially price research.
Conjoint analysis includes a set of trade-off analysis methods such as Full Profile Conjoint Analysis, Adaptive Conjoint Analysis, Choice-Based Conjoint Analysis (CBC) and some other variations of the latter (Partial Profile CBC, Adaptive CBC). Which method should we use? The one that better reflects how buyers make decisions in the marketplace . (Getting started with Conjoint Analysis, Bryan Orme, 2006)
Choice-Based Conjoint Analysis (CBC) is widely used since it tries to mimic the actual purchase decision process for products within a competitive context. In CBC we present different product configurations to respondents and ask which they would choose or purchase. Products are configured using a set of relevant attributes, including price.
As an example, to conduct a Choice-Based Conjoint Analysis for the aforementioned online market research training classes, we would follow the following steps.
The table below has an example of attributes that could have been included to test online market research courses.


Using this approach for the case of online market research courses would not only provide a more realistic scenario for respondents, but also prevents them from focusing solely on price, decreasing the natural tendency to lowball when price becomes the center of attention, as it happens in price research approaches using direct questions about willingness to pay, purchase intent or the Van Westendorp PSM.
In the case of the online market research course, the market simulator could indicate that Option 1 in the example below gets the highest share of preference likely due not only to a lower price point, but also to the availability of a Q&A option. Option 3, which doesn’t have a Q&A option, with a similar price point to Option 1, gets the lowest share of preference. Even Option 2, which offers Q&A with a live instructor, receives a higher share of preference despite having the highest price.

Simpler price research approaches are appealing because of their simplicity, affordability and ease of implementation, which suit many managers that don’t have much experience with statistics and may not feel comfortable with advanced techniques such as Conjoint Analysis. Unfortunately, simpler approaches often don’t reflect how people make buying decisions and can result in misleading conclusions.
As for cost, the field of conjoint analysis is constantly evolving and new techniques have become more accessible and affordable to research practitioners as computational tools become commercially available, so cost should not be a big barrier as has been in the past to the use Conjoint Analysis for more realistic price research.
This is part of a series of pricing research posts that Jeffrey Henning and I are writing. The series so far:
- Getting The Price Right Takes More Than Guesswork
- Conjoint Analysis And Realism In Price Research
- Making The Case Against The Van Westerndorp Price Sensitivity Meter
- The Van Westendorp Price Sensitivity Meter
- Monadic Price Testing: “Shh, It’s All About Price
- Estimating Willingness to Pay
To learn more about our price research service visit Price Research.
As published in the Market Research Association’s Alert! Magazine, November 2010.

There is an intense discussion among marketing researchers about whether DIY research is going to replace external marketing research vendors. Sometimes it feels that way. The rapid proliferation of DIY marketing research is making some external marketing researchers anxious about their livelihood, while others are simply angry about the trend towards “good enough” research which can potentially produce biased data and misguided conclusions.
Reduced marketing budgets, access to relatively cheap online survey tools and the precarious position that marketing research holds in many companies have led many to see DIY research as an acceptable alternative and sometimes the answer to management’s prayers to get at least some data on the cheap.
I know how it is. I was the ultimate DIY research department at several of my former employers on the client side. I was able to provide high quality primary marketing research at a very low cost, and a quick turnaround. I estimate I saved those companies millions of dollars in research. And that’s what companies are expecting, particularly in difficult economic times. Notice that I say “high quality,” “low cost,” and “quick turnaround.” How? Simple: Expertise and experience.
Did I replace research vendors? Yes and no. My team could tackle many research projects that could have otherwise gone to external marketing research vendors. But there were other instances where I needed to call vendors.
After being on both sides of the river, I think external marketing research vendors will still be needed for years to come despite the spread of DIY marketing research.
Hiring marketing research vendors can be beneficial because they can:
There is the belief that DIY marketing research is always cheaper than hiring an external vendor. If we look only at the cash that could have been paid to an external vendor, DIY research is definitely cheaper. However, I would argue that DIY research is not always cheaper. I have seen many cases in which the research needs to be done again due to bad research designs at the hands of inexperienced DIY research teams. In times when many think they can write a survey because of access to cheap survey tools, the need for expertise is often disregarded costing thousands of dollars in wasted resources on decisions made on less than reliable data. In estimating the actual cost of DIY research, companies need to factor in the alternative cost of getting bad data quality, an inadequate research approach and misleading conclusions.
In short, consider hiring an external marketing research vendor when:
| by Michaela Mora | ![]() |

The increase of cell phone-only households and use of cell phones most of the time, even by those who still have landlines, is becoming a serious issue market researchers involved in survey research can’t overlook.
Why can’t we ignore cell phones? It is a matter of coverage, as Scott Keeler, the Director of Survey Research at the Pew Research Center pointed out in a recent presentation to members for the Market Research Association (MRA). He called attention to the fact that at least 25% of adults can be reached only on a cell phone, proportion that is even higher is certain groups such as young adults 25 – 29 (51%), 18 – 24 (40%) and Hispanics (34%). This means that when we rely only on landline sample frames, certain population segments are likely to be underrepresented. Analysis of data from the Census and Pew Research Center surveys shows that only 7% of adults 18 -29 can be found in landline samples, while 66% are adults over 50.
Including cell phones in telephone samples is more complex than just calling to landlines. Keeler pointed out a set of practical, legal and ethical issues we face when dealing with cell phones samples.
LEGAL
ETHICAL
To deal with these ethical issues, telephone surveys with cell phone samples need to be designed to carefully screen respondents and verify to whom we are talking, if it is the right time to call, if it safe for the respondent to talk and if the person is in position to talk about sensitive topics.
DATA QUALITY
Concerns about the quality of the data for cell phone samples have also been voiced. Audio quality during the interview, potential distractions for the respondent, respondents’ multitasking, possible desire to rush to complete the interview, and sensitive topics are among the factors that could have a negative impact on data quality in cell phone samples.
HOW MUCH DOES IT COST?
Unfortunately, including cell phones in telephone samples doesn’t come cheap due to the inefficiencies brought by the above mentioned legal issues and the pricing structure of cell phone services in the US, where consumers pay not only for the calls they make, but also for the ones they receive.
According to the American Association for Public Opinion Research (AAPOR)‘s Cell Phone Task Force, cell phone interviews are typically at least twice as expensive as landline interviews, and can be three or four times more costly if cell phone-only samples are used.
To find guidance in how to meet the difficult and costly challenges of cell phone surveys check the 2010 AAPOR Cell Phone Task Force Report: New Considerations for Survey Researchers When Planning and conducting RDD Telephone Surveys in the U.S. With Respondents Reached via Cell Phone Numbers
WHAT ARE THE ALTERNATIVES?
Finally, if your organization can only afford landline samples, luckily, according to Keeler:

Although these are good news, they don’t provide a solution to the coverage issue, so if you are interested in reaching young groups that can’t be reached by landlines, and can’t afford a cell phone sample, you should consider a hybrid approach that combines telephone and online surveys or give ABS a try.