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# 07.07.

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Conjoint Analysis
Basic Principle

Klaus Goepel 7.7.2010

Conjoint Analysis
Basic Principle

The presentation explains the principle, using a simple example. It shows, how to calculate the part-worth utilities and how to derive the relative preferences from individual attributes from there. A full factorial and a fractional factorial design is used. An Excel template for this example is available from the author.

Conjoint analysis or Stated preference analysis is a statistical technique that originated in mathematical psychology.

Conjoint Analysis 7.7.2010 Gp

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stated preference analysis. .2010 Gp 2 . AHP Today it is used in many of the social sciences and applied sciences including . analytic hierarchy process. MP3 player… a b Your Preference The preference for a combination of (conjoint) attributes will reveal the “partworth” of individual attributes. . Attribute 1: Memory Attribute 2: Delivery Attribute 1: Memory Attribute 2: Delivery Conjoint Analysis 7. linear regression. Conjoint Analysis Basic Principle Buying a smart phone.7.07.Marketing. marketing. utilities. part-worth.Operations research. relative preference.Product management. product management.10 Conjoint Analysis Basic Principle Keywords conjoint analysis. statistics.07.

07.2010 Gp 3 . MP3 player… a b The preference for a combination of (conjoint) attributes will reveal the “partworth” of individual attributes. MP3 player… Part-worth utilities of individual attributes are calculated based on the ranking of a defined set of combinations of attribute values. Higher emphasis on short delivery time.10 Conjoint Analysis Basic Principle Buying a smart phone. Higher emphasis on large memory size Conjoint Analysis Basic Principle Buying a smart phone. Conjoint Analysis 7.07.7.

64 MB. 1 week Sequence Delivery Memory Conjoint Analysis Basic Principle “Conjoint” Attributes Green. +1 Example Buying a smart phone Models: 1 2 3 4 Delivery Green. 16 MB. 1 day Red. 1 day Red. 64 MB. 64 MB.07. 16 MB. 64 MB. 1 week Green. 1 week Green. 16 MB. 16 MB. 64 MB 1 day. red 16 MB. 16 MB. 1 week Red. 64 MB. 1 day Red. 1 day Red. MP3 player… Attributes: Color Memory green. 1 day 1 2 3 4 5 6 7 8 -1 1 -1 1 -1 1 -1 1 Color -1 -1 1 1 -1 -1 1 1 -1 -1 -1 -1 1 1 1 1 Attribute values are coded with -1 and +1 Attribute 1: Color Attribute 2: Memory Attribute 2: Delivery Example Buying a smart phone Conjoint Analysis 7. 1 day Green. 16 MB. 64 MB. 1 week 5 6 7 8 Green. 16 MB. 1 day Attribute values are coded with -1 and +1 Attribute 1: Color Attribute 2: Memory Attribute 2: Delivery Levels: -1.2010 Gp 4 . 1 day Green. 1 week Red. 64 MB.10 Conjoint Analysis Basic Principle Buying a smart phone. 16 MB. 1 week Red.07.7. 1 week Green. 1 week Red. 64 MB.

-1) Graphical Representation of Combinations Full factorial Design -1 1 -1 1 -1 1 -1 1 3 2 4 4 5 6 7 8 m 1 X2 X1 X3 color X2: Memory = (+1.07.2010 Gp 5 .10 Conjoint Analysis Basic Principle Full factorial design Design Matrix -1 1 -1 -1 -1 1 1 -1 -1 1 1 -1 -1 -1 -1 1 1 1 1 Design Matrix k attributes: 2k possible combinations Full factorial Design k attributes: 2k combinations 1 -1 1 -1 1 Conjoint Analysis Basic Principle X1 7 5 delivery 6 8 1 2 3 or em y X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 X1: Color = (+1.7.07.-1) Conjoint Analysis 7.-1) X3: Delivery = (+1.

16 MB.-1) X3: Delivery = (+1. 1 day X1 -1 1 -1 1 -1 1 -1 1 X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 Rank 8 7 4 3 6 5 2 1 X1: Color = (+1. 1 week Green. 16 MB.-1) Ranking of combinations 1 2 3 4 5 6 7 8 Conjoint Analysis Basic Principle Linear model function with part-worth utilities Ranking = part-worth of attribute 1 * attribute 1 level + part-worth of attribute 2 * attribute 2 level + part-worth of attribute 3 * attribute 3 level + baseline preference Linear Model Function The system of linear equations can be solved with linear regression Y= color*X1 + memory*X2 + delivery*X3 + µ X1: Color = (+1. 1 week Red. 1 week Red. 1 day Red.2010 Gp 6 .-1) X2: Memory = (+1. 1 day Red.-1) X2: Memory = (+1. 1 day Green.-1) X3: Delivery = (+1.7. 16 MB.10 Sequence Conjoint Analysis Basic Principle “Conjoint” Attributes Green.07. 64 MB.-1) Conjoint Analysis 7. 16 MB.07. 64 MB. 1 week Green. 64 MB. 64 MB.

10 Conjoint Analysis Rank Basic Principle Part-worth utilities = -1 1 -1 1 -1 … 1 -1 1 * + -1 -1 1 1 -1 … -1 1 1 * + -1 -1 -1 -1 1 … 1 1 1 * + µ Linear Model Function The system of linear equations can be solved with linear regression 8 7 4 3 6 5 2 1 Color Memory Delivery X1 7 5 6 8 1 2 3 3 1 2 4 4 5 6 7 8 -1 1 -1 1 -1 1 -1 1 X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 Rank 8 7 4 3 6 5 2 1 Graphical Representation of Combinations Conjoint Analysis 7.7.07.2010 Gp … … … Conjoint Analysis Basic Principle 7 .07.

5 4 2 4 5 6 7 8 ¼ [16 16 .0.5 Conjoint Analysis Basic Principle X1 7 5 6 8 1 2 3 3 1 X2 Main effect X2 Mem= X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 -1 1 -1 1 -1 1 -1 1 Rank 8 7 4 3 6 5 2 1 Color Memory Graphical Representation of Combinations Calculating Part-worth Utilities = .26 26] ÷2 = -2 8 Conjoint Analysis 7.5 = -2 4 2 4 5 6 7 ¼ [10 10 .07.0.20 20] ÷2 = -0.07.2010 Gp 8 .7.10 Conjoint Analysis Basic Principle X1 7 5 6 8 1 2 3 3 1 X1 Main effect X1 Col= X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 -1 1 -1 1 -1 1 -1 1 Rank 8 7 4 3 6 5 2 1 Color Graphical Representation of Combinations Calculating Part-worth Utilities = .

10 Conjoint Analysis Basic Principle X1 7 5 6 8 1 2 3 3 1 X3 Main effect X3 Del= X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 -1 1 -1 1 -1 1 -1 1 Rank 8 7 4 3 6 5 2 1 Color Memory Graphical Representation of Combinations Calculating Part-worth Utilities = .0.5 = -2 = -1 4 2 4 5 6 7 Delivery ¼ [14 14 .0.7.5 -2 -1 3 1 2 4 Mem Del Color Memory Delivery Conjoint Analysis 7.2010 Gp 9 .07.07.22 22] ÷2 = -1 8 Conjoint Analysis Basic Principle 7 5 6 8 Part-worth utilities = = = Graphical Representation of Combinations Calculating Part-worth Utilities = .5 = -2 = -1 Color -0.

10 Conjoint Analysis Basic Principle Actual ranking and description with linear model function 9 8 7 6 5 4 3 2 1 0 1 week 16 MB green 1 week 16 MB red 1 week 64 MB green 1 week 64 MB red 1 day 16 MB green 1 day 16 MB red 1 day 64 MB green 1 day 64 MB red Rank Model Ranking and Model Function Color Memory Delivery = .07.5 = -2 = -1 Y = 4.5 = -2 = -1 Conjoint Analysis Basic Principle Actual ranking and description with linear model function 9 8 7 6 5 4 3 2 1 0 1 week 16 MB green 1 week 16 MB red 1 week 64 MB green 1 week 64 MB red 1 day 16 MB green 1 day 16 MB red 1 day 64 MB green 1 day 64 MB red Rank Model Ranking and Model Function Color Memory Delivery = .5 -0.2010 Gp 10 .5 Xcolor -2 XMemory -1 XDelivery Conjoint Analysis 7.07.0.0.7.

10 Conjoint Analysis Basic Principle 7 5 6 8 Variations for Xi=±1 ±1 · ±1· ±1· = ±0. Sub-criteria .comparison Weights: Principal Eigenvector Ratio Scale. relative Scale Evaluation of Alternatives Conjoint Analysis & Analytic Hierarchy Process AHP 2k Combinations k2 – k 2 Comparisons k=4: 16 possible combinations k=4: 6 pair-wise comparisons Conjoint Analysis 7.07.07.5 = 1 = = ±2 = 4 ±1 = 2 7 Calculating relative preferences Col 3 1 Color Memory Delivery 1÷7 = 4÷7 = 2÷7 = 2 4 Mem Del 14% 57% 29% Conjoint Analysis Basic Principle Conjoint Analysis Attributes Part-worth Utilities Levels Ranking AHP Criteria.7.2010 Gp 11 .

07.7.10 Conjoint Analysis Basic Principle X1 7 5 6 8 1 2 3 3 1 2 4 4 5 6 7 8 -1 1 -1 1 -1 1 -1 1 X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 Rank 8 7 4 3 6 5 2 1 Fractional Design Conjoint Analysis Basic Principle X1 7 5 6 8 1 2 3 3 1 2 4 4 5 6 7 8 -1 1 -1 1 -1 1 -1 1 X2 -1 -1 1 1 -1 -1 1 1 X3 -1 -1 -1 -1 1 1 1 1 Rank 8 7 4 3 6 5 2 1 Fractional Design Graphical Representation Conjoint Analysis 7.07.2010 Gp 12 .

07.10 Conjoint Analysis Basic Principle X1 7 5 6 8 2 3 3 1 2 4 5 -1 -1 1 6 1 -1 -1 1 -1 -1 7 4 Fractional Design X2 X3 Rank Graphical Representation 3 23-1 Fractional design 8 1 1 1 1 4 23-1 III ±3 = 12 Conjoint Analysis Basic Principle X1 4 3 1 2 3 2 1 4 1 -1 -1 1 X2 -1 1 -1 1 X3 -1 -1 1 1 Rank 7 4 6 1 Fractional Design Graphical Representation 23-1 Fractional design Conjoint Analysis 7.7.07.2010 Gp 13 .

10 Conjoint Analysis Basic Principle Fractional factorial design 2k-p 4 3 1 2 3 2 1 4 X1 1 -1 -1 1 X2 -1 1 -1 1 X3 -1 -1 1 1 Rank 7 4 6 1 Calculating Part-worth Utilities Color Fractional Design Graphical Representation X1 Main effect X1 = .07.7.2010 Gp 14 .0.5 Conjoint Analysis Basic Principle Fractional factorial design 2k-p 4 3 1 2 3 2 1 4 X1 1 -1 -1 1 X2 -1 1 -1 1 X3 -1 -1 1 1 Rank 7 4 6 1 Calculating Part-worth Utilities Color Fractional Design Graphical Representation X2 Main effect X2 Memory = .5 ½ [(7+1)–(4+6)] ÷2 = -0.0.5 = -2 ½ [(4+1)–(7+6)] ÷2 = -2 Conjoint Analysis 7.07.

7.07.0.5 = -2 = -1 ½ [(6+1)–(7+4)] ÷2 = -1 Conjoint Analysis Basic Principle Fractional Design Using a fractional factorial design the number of attribute combinations can be reduced.10 Conjoint Analysis Basic Principle Fractional factorial design 2k-p 4 3 1 2 3 2 1 4 X1 1 -1 -1 1 X2 -1 1 -1 1 X3 -1 -1 1 1 Rank 7 4 6 1 Calculating Part-worth Utilities Color Fractional Design Graphical Representation X3 Main effect X3 Memory Delivery = .07. Conjoint Analysis 7.2010 Gp 15 .

Conjoint Analysis 7.7.2010 Gp 16 .10 Conjoint Analysis Basic Principle Simple conjoint analysis can be done with linear regression.07. but more sophisticated statistical models and solutions are available.07.