Series F

TQM Training Module on

Conjoint Analysis
Doc. No. F-08.07.20180602
Revision 01; 02nd June 2018
Authors: Pratik Kothari

For further clarifications, write to kothari.Pratik@jsw.in

© TQM department, JSW Vijayanagar
 TQM Training Series: 6 series with 66 training modules
This is a training module on Conjoint Analysis (F-08)

Series-A Series-C Series-D Series-F

Basic Problem Solving Tools Quality Management Basics Productivity & Efficiency Tools Advanced Statistical Tools
A-01 Flow Charts C-01 Quality Mgmt. Basics D-01 Value Stream Mapping (VSM) F-01 Sampling & Distribution
A-02 Cause & Effects Diagram C-02 Basic Statistics D-02 Time & Motion Study F-02 Hypothesis Testing
A-03 Stratification C-03 Statistical Process Control D-03 SMED F-03 Regression
A-04 Scatter Diagram C-04 KPI Drill Down D-04 Wrench Time Analysis F-04 Basics of DoE
A-05 Control Charts C-05 KPI Benchmarking D-05 Queuing Theory F-05 Factorial DoE
A-06 Check Sheets C-06 Strategic Analysis Tools D-06 Inventory Management F-06 Principal Component Analysis
A-07 Histogram C-07 Policy Management D-07 Linear Programming Problem F-07 Cluster Analysis
C-08 Policy Diagnosis F-08 Conjoint Analysis
A-08 Pareto Charts D-08 Game Theory
C-09 Daily Management F-09 Discriminant Analysis
A-09 Graphs D-09 OEE
C-10 Daily Mgmt. in Maintenance F-10 Factor Analysis
D-10 PERT & CPM
Series-B C-11 Cross Functional Mgmt. F-11 Response Surface Method
C-12 Quality Assurance Basics
Basic Management Tools F-12 Taguchi DoE
C-13 MSA
B-01 Brainstorming Series-E F-13 Weibull Analysis
C-14 PFD, FMEA, Control Plan
B-02 Affinity Diagram Decision-making Tools
C-15 Cost of Poor Quality (COPQ)
B-03 Arrow Diagram C-16 Improvement Fundamentals E-01 Quality Function Deployment
B-04 Tree Diagram C-17 4i Methodology E-02 Fault Tree Analysis
B-05 PDPC C-18 5S E-03 AHP & Paired Analysis
B-06 Matrix Diagram C-19 Quality Circles E-04 Pugh Matrix
B-07 Matrix Data Analysis C-20 QC Story Approach E-05 Time Series Analysis
B-08 Relation Diagram C-21 Kaizen, OPL, Poka Yoke
Flow of the module: Conjoint Analysis

1 Product Management

2 Conjoint Analysis: Introduction

3 Conjoint Analysis: Examples

Product Management

Project
Quality Developers Managem
Assurance ent
comes comes
Product management is an organizational lifecycle here here
function within a company dealing with the planning, A C
forecasting, and production, or marketing of
a product or products at all stages of
the product lifecycle.
White Space in the fig.(A,B,C) connotes missing link Product
in the product network.

Region A is the white space that exist between

B
developer, the product and user
Region B is the white space between users, the
product and the Business Users Business
Region C is the white space that exist between
Developers, the Product and the Business
.
Business
In Product Management, Conjoint analysis helps to understand the Developm
trade off which the market will make. ent
comes
here
Flow of the module: Conjoint Analysis

1 Product Management

2 Conjoint Analysis: Introduction

3 Conjoint Analysis: Examples

Conjoint Analysis: Introduction

• Conjoint Analysis is a multivariate technique used specifically to understand how

respondents develop preferences for products or services. It can provide valuable
information for new product development and forecasting, market segmentation
DEFINITION

and pricing decisions.

• It is based on the simple premise that consumers evaluate the value or utility of a
product (real or hypothetical) by combining the utility provided by each attribute
characterizing the product. The primary purpose of Conjoint Analysis is to model
human behavior, usually purchase behaviour. It’s analysis involves presenting
people with choices and then analyzing what were the drivers for those choices.
PRINCIPLE

• The Principle behind Conjoint analysis starts with breaking a product or service into
its constituents parts(attributes) and then to test combination of these parts in order
to find what customer prefer.
Conjoint Analysis: Introduction

Conjoint answers the following Questions:

How many of
What features these will I sell?
should my Who will buy them?
product have? 3 4
2
What price will
maximize my 5 Why will they buy
profits? 1 them?

What will happen to my sales if my

6
competitor alters his product line?

What market action can I take that will be

7 most devastating to my competitor?
Conjoint Analysis: Introduction

Similarities

Conjoint Analysis Regression Analysis

1 Respondent's rating for the Product Dependent Variable

Characteristics of the Product( Independent Variable

2
Attribute Level)

3 Utilities( Preference score) for the Estimated Beta associated with the
levels Independent Variable

4 Internal Consistency of Respondents R-Square value

Conjoint Analysis: Introduction

The attribute can be

Steps to conduct a Conjoint Analysis appearance, size or price
etc.
1 Choose the Product Attribute
The higher the number of
options used for each
attribute, the more burden
2 Choose the values or options for each attribute that is placed on the
respondents
Define products as a combination of attribute
3
options The set of combination of
attributes that will be used
Choose the form in which the combination of will be a subset of possible
4 universe of products
attributes are to be presented to the
Options include verbal respondents
presentation, paragraph
description and pictorial
presentation. 5 Decide how responses will be aggregated

There are three choices: use individual Select the technique to be used to analyze the
responses, pool all responses into a single 6
collected data
utility function or define segment of
respondents who have similar preferences.
Flow of the module: Conjoint Analysis

1 Product Management

2 Conjoint Analysis: Introduction

3 Conjoint Analysis: Examples

Conjoint Analysis: Example

Consider a case of cell phone plans. These plans have various feature types, which
in the language of conjoint analysis are called attributes. Let’s focus on Brand,
Price, Minutes, Net usage, and Call Options. Each of the attributes listed below has
different levels. The levels of the Brand attribute might be Vodafone, Airtel, BSNL.
Attributes Level
Brand Vodafone, Airtel, BSNL.
Rs.600/month,
Price Rs.550/month,
Choose the Product Rs.700/month
Step 1
Attribute
Minutes 1400,1000,800
Net Usage 1.5 GB,1.2 GB, 2GB
No free calling number, 1
Call Options free calling number, 2 free
calling numbers
Conjoint Analysis: Example

Survey the market

Conjoint analysis survey questions could take a variety of forms, depending

on your study objective, but the most common type of question would be:

Which of the following cell phone plans would you prefer?

Vodafone Airtel BSNL

1400 minutes 1000 minutes 800 minutes

1.5 GB 1.2 GB 2 GB
No free calling 1 free calling 2 free calling
number number numbers
Rs.700/month Rs.600/month Rs.550/month
Conjoint Analysis: Example

Step 2 Choose the values or options for each attribute

• From responses to these questions, conjoint analysis uncovers the underlying value for each level,
depending on how often a level was included in the product selected. The relative value of the levels is
what is relevant, in other words, how the value of one level compares to the value of another.
• For example, the values for the levels of the Call Options attribute and the Net Usage
Options attribute for one respondent might be:

Call Options Value Net Analysis:

Value
Usage
It is shown in the example, given the levels tested, the
2 free calling Net Usage attribute (with values ranging from 10 to 70)
50 2 GB 70
numbers was more important to the respondent than the Call
Options attribute (with values ranging from 0 to 50).
1 free calling 1.5 GB 30
20 These values can be calculated for individuals as well as
number
for the overall market, which means you can use
No free calling 1.2 GB 10 conjoint analysis to segment your market based on
0 respondent characteristics, needs and preferences. Each
number
of the level values is called a part-worth, because they
represent the worth of any given part of the product.
Conjoint Analysis: Example

Step 3 Define products as a combination of attribute options

Choose the form in which the combination of attributes are to be presented to the
Step 4 respondents

Once you see the part-worth, you understand what trade-offs to make so that the product will be more
desirable to the market. This predictive capability is where the real power of conjoint analysis is evident. For
example, given a set of part-worth, you might have the following scenario:

Attributes Value Attributes Value Attributes Value Analysis:

The total value of the BSNL product is
Vodafone Airtel BSNL
(Brand)
40
(Brand)
35
(BRAND)
20 40 more than the Vodafone product.
These consumers would be more likely
1400 minutes 60 1000 minutes 40 800 minutes 10 to select the BSNL product. But, if the
1.5 GB 30 1.2 GB 10 2 GB 70 call option was changed from “ No Free
calling number” to “2 free calling
No free calling 1 free calling 2 free calling numbers”, the overall value of Vodafone
0 30 50
number number numbers
would increase and the consumer would
Rs.700/month 40 Rs.600/month 55 Rs.550/month 60 be likely to buy Vodafone product . The
overall value of a product is referred to
Total 170 Total 170 Total 210 as its total utility.
Conjoint Analysis: Example

Step 5 Decide how responses will be aggregated

Step 6 Select the technique to be used to analyze the collected data
Now that each attribute level has an associated part-worth, we can create any number of competitive
scenarios by mixing and matching the levels and increasing or decreasing the number of products. The result
of any conjoint analysis study is a simulation model that allows you to simulate, for example, what share of
the market will prefer your product versus your competitors’ products. For example, you might see results
like this:

Vodafone Airtel BSNL

These shares, totaling 100%, are
called “shares of preference,” 1400 minutes 1000 minutes 800 minutes
because they refer to the share of 1.5 GB 1.2 GB 2 GB
the market that prefers each
product, if everything else , such No free calling number 1 free calling number 2 free calling numbers
as sales and marketing efforts,
distribution channels, product Rs.700/month Rs.600/month Rs.550/month
lifecycle phase, etc. were equal.
31% 31% 38%
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