Consumer Behavior Conjoint analysis

Conjoint Analysis

Consumer Behavior Conjoint analysis

Outline
Basic idea of conjoint analysis Steps in conjoint analysis Uses of conjoint analysis

Consumer Behavior Conjoint analysis

Basic idea
Overall utility for a product can be decomposed into the utilities (called part-worths) associated with the levels of the individual attributes of the product; The relative importance of a given attribute is given by the ratio of the part-worth range for that attribute divided by the sum of all partworth ranges;

Consumer Behavior Conjoint analysis

Steps in conjoint analysis

Determine attributes and attribute levels Select product profiles to be measured Choose a method of stimulus presentation Decide on the response method Collect and analyze the data Interpret the results

Consumer Behavior Conjoint analysis

Attributes and attribute levels

Identify the relevant product attributes that are considered during choice Select attribute levels that represent the options actually available in the market Trade-off between the completeness of the representation and the complexity of the design

Consumer Behavior Conjoint analysis

Product profiles
Full factorial designs:
all possible combinations of the levels of the various attributes

Fractional factorial designs:

subset of all possible combinations orthogonal designs in which each level of one attribute is paired equally with all the levels of other attributes

Consumer Behavior Conjoint analysis

Example: Laptop Profiles

Brand Dell Apple Dell Apple Dell Apple Apple Apple Apple Dell Dell Dell
Hard Drive

RAM 2 GB 4 GB 4 GB 2 GB 4 GB 2 GB 4 GB 2 GB 4 GB 2 GB 4 GB 2 GB

Screen 15.4 in 15.4 in 15.4 in 15.4 in 12.1 in 12.1 in 15.4 in 12.1 in 12.1 in 12.1 in 12.1 in 15.4 in

Price $1,200 $1,200 $900 $900 $1,500 $1,500 $1,500 $900 $1,200 $1,200 $900 $1,500

A 9 6 12 11 4 1 3 8 5 7 10 2

B 6 12 5 11 3 9 10 7 8 1 4 2

320 GB 320 GB 160 GB 320 GB 320 GB 320 GB 160 GB 160 GB 160 GB 160 GB 320 GB 160 GB

Consumer Behavior Conjoint analysis

Methods of stimulus presentation

Verbal descriptions
Apple Laptop with 320 GB of Hard Disk Space, 4 GB of Ram, and a Screen Size of 15.4 inches at a Price of $1,200.

Pictures Actual products or prototypes

Consumer Behavior Conjoint analysis

Response method
Rankings or ratings of the product profiles in terms of preference, purchase probability, etc. Pairwise comparisons of product profiles in terms of preference, purchase probability, etc. Choice of a product from a set of product profiles

Consumer Behavior Conjoint analysis

In-class exercise
Using the data in the table, answer the following questions: (a) How much utility does each of the two consumers attach to the different levels of the five attributes? (Hint: Compute each consumers average rating of all the options with a given feature. For example, to figure out how much consumer A values the Apple brand name, compute the average rating of the six Apple laptops.) (b) Whats the relative importance of the five attributes for the two consumers? (c) Consider consumer As ratings. For this consumer, whats the predicted utility of a Dell computer with 160 GB of hard drive space and 2 GB of RAM, a 12.1 inch screen, and a price of $1,200? (d) How much could you raise the price if you increased the screen size from 12.1 to 15.4 inches?

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Consumer Behavior Conjoint analysis

Uses of conjoint analysis

Market segmentation
Q: How would you segment the market using individual-level conjoint analysis output?

New product design

Q: How can conjoint analysis be used for new product design?

Trade-off analysis (esp. in pricing decisions)

Q: How much could the price of a Dell computer with 160 GB of hard drive space and 2 GB of RAM, which currently sells for $1,200, be raised if the screen size were increased from 12.1 in to 15.4 in?

Competitive analysis
Q: How can conjoint analysis be used to simulate market shares?