Partner Article

What is MaxDiff? And how to use it for your business

When booking your summer holiday, what’s the most important factor in helping you choose? Perhaps you’re on a budget and it’s the price that concerns you the most. Maybe you want to go back to your favourite holiday destination. Or it could be a need to be by the sea. Perhaps it’s all three.

Take this next scenario: you want to lie back and watch some TV, but with so many different providers (Netflix, Apple TV, Amazon Prime etc.), how do you choose which subscription to exchange your hard-earned cash for? Is it the variety of shows? Does it have something your kids love watching? Is there a special deal on offer?

How do we measure the importance of these endless different possibilities? If you’re conducting a survey, then this should be a pretty straightforward exercise, right? You list out all the possible motivations and ask respondents how much they contribute to the decision. You use a five-point scale, or a ten-point scale; throw in an ‘Other’ for good measure. Simple.

But how useful is the information you’ve collected? Think about this question: When booking a flight, how important is it that the seats are comfortable? You think of your back, which has been playing up, so this becomes a very important factor. Onto the next question: When booking a flight, how important is it that there is a personal in-flight entertainment system? You’re going to be flying for hours. You don’t want to be bored. So, again, this is very important. Suddenly you have a dozen ‘Very important’ answers and you’ve learned nothing. Unfortunately, businesses sometimes fail to notice when rating scales fail to truly differentiate between audience preferences.

This is where MaxDiff comes in.

What is MaxDiff analysis & how can it benefit businesses

Short for Maximum Difference Scaling (and sometimes referred to as Best-Worst Scaling), MaxDiff is a simple and effective method which allows you to understand the priorities and quantify the preferences or importance consumers attach to a product or service. Regardless of your industry or product type, MaxDiff analysis will enable you to make strategic business decisions based on accurate insights.

The approach allows you to rank items by doing what the brain does best. As consumers, when we choose from a list, say a menu, we tend to be very good at picking out both our favourite, but also our least favourite option. The ones in the middle are often a bit harder to rank. Research has demonstrated that surveys that feature rating questions are vulnerable to factors such as scale bias. A chef looking to create a new menu might ask how they would rank different dishes, but these dishes could all end up rating highly if they are popular dishes. Similarly, a ranking scale survey is susceptible to the respondents’ mood or even if they are feeling hungry/full at that point. This makes the survey difficult to analyse efficiently and accurately.

Instead of asking about attributes in isolation, MaxDiff pits them up against each other in the form of a set of attributes (this is the term that is generally used for a list of options researchers wish to rank). We can have more than three attributes; four is the standard. But it’s important to be careful to not to overload respondents with options.

MaxDiff business applications

MaxDiff is one of the most versatile pieces of analysis around, but what kinds of business scenarios is it used for? Think along the lines of the following:

It can be used for board and executive level decision making, for instance in advance of an offsite.

Marketing – when deciding features for new products or services, MaxDiff can be applied to a test sample of potential customers to measure appeal. A product team can use it to gather user input on key features during design phase of new system.

Employee engagement – MaxDiff analysis could help you understand what’s important to your workforce to inform new initiatives. Audience feedback – it is an effective way to gain feedback on products and services.

When deciding on new values for an organisation, it can be used to gather employee feedback and importantly increases engagement.

How to analyse MaxDiff data

If you’re wondering how to analyse MaxDiff data, the great news is it can be done in several different ways. The most common way is using a 0—100 scale. Each respondent will get a score between zero and a hundred for each attribute. This means we can treat them like any other variable and filter the scores by other characteristics such as demographics.

MaxDiff can also be used to segment based on the patterns of response, or we can run a TURF analysis, to find out the combination of items which have the broadest appeal. All without needing any extra questionnaire length.

Many studies have demonstrated that the MaxDiff approach gives superior predictions in real life, which is why we often recommend it to our clients when decisions of the business are based on the outcome of the research.

The great thing about MaxDiff is its flexibility as a tool. The examples above are about importance of factors. But MaxDiff can be used for anything which can be ranked. For instance, one MaxDiff analysis example could include testing the effectiveness of different messages or where a business should prioritise its investment. We’ve even used it to test a list of things from everyday life that people can’t live without. The possibilities are limitless.

Karsten Shaw, Analytics Partner, Yonder Consulting

This was posted in Bdaily's Members' News section by Yonder .