ADVANCE MARKETING RESEARCH

On

CONJOINT ANALYSIS

Submitted to -
Dr Shripad Kulkarni

Submitted by - Group 3
Arijit Dutta (202112058)
Jyotsana Srivastava (202131010)
Priyam Sur (202111026)
Riya Chhabra (202112070)
Rohan Paul (202112066)
T.A Fuaad Sanin (202112069)
Executive Summary-

This document is a brief report on Conjoint analysis with a solved example of a practical case
where we have to find the attributes among a given 3 attributes having 3 levels each that have the
highest utility among the customers.

Conjoint analysis is a marketing tool that was designed by marketing professor Paul E Green at
the Wharton School of the University of Pennsylvania. It is a statistical method based on survey
data that aids in understanding how consumers value various characteristics (features, functions,
and advantages) that make up a specific good or service.

For solving the case of finding the best utility attribute of a pen, we have done the conjoint analysis
with the help of Excel. And after analysis, we found that customers while buying their pens are
looking for the correct weight of the pen as well as the tip diameter for their final purchase, as the
range of weight is 14.022 and the range of tip diameter is 12.778. These are the two attributes that
have the highest utility, with a 10-gm weight and a 0.50 mm tip diameter having the highest utility
level. We have also done a utility ranking and found that a pen with 10 gm of weight, the colour
green, and a 0.50 mm tip diameter is the most valued.

At the end of the report, we have given a few managerial implications that can be drawn out of it.

What is Conjoint Analysis?

Conjoint analysis is a form of statistical analysis that firms use in market research to understand
how customers value different components or features of their products or services. It’s based on
the principle that any product can be broken down into a set of attributes that ultimately impact
users’ perceived value of an item or service.

Conjoint analysis is typically conducted via a specialized survey that asks consumers to rank the
importance of the specific features in question. Analyzing the results allows the firm to then assign
a value to each one.

Source - https://online.hbs.edu/blog/post/what-is-conjoint-analysis

What is Conjoint Analysis Used For?

1. Conjoint Analysis in Pricing Decisions

Conjoint analysis works by asking users to directly compare different features to determine how
they value each one. When a company understands how its customers value its products or
services’ features, it can use the information to develop its pricing strategy.

As such, conjoint analysis is an excellent means of understanding what product attributes

determine a customer’s willingness to pay. It’s a method of learning what features a customer is
willing to pay for and whether they’d be willing to pay more.

2. Conjoint Analysis in Advertising, Sales & Marketing Communication

Conjoint analysis can inform more than just a company’s pricing strategy; it can also
inform how it markets and sells its offerings. When a company knows which features its
customers value most, it can lean into them in its advertisements, marketing copy, and
promotions.

On the other hand, a company may find that its customers aren’t uniform in assigning value
to different features. In such a case, conjoint analysis can be a powerful means of
segmenting customers based on their interests and how they value features—allowing for
more targeted communication.

For example, an online store selling chocolate may find through conjoint analysis that its
customers primarily value two features: Quality and the fact that a portion of each sale goes
toward funding environmental sustainability efforts. The company can then use that
information to send different messaging and appeal to each segment's specific value.

3. Conjoint Analysis in Research for New Product Development

Conjoint analysis can also inform a company’s research and development pipeline. The
insights gained can help determine which new features needs to be added to its products or
services, along with whether there’s enough market demand for an entirely new product.

For example, consider a smartphone manufacturer that conducts a conjoint analysis and
discovers its customers value larger screens over all other features. With this information,
the company might logically conclude that the best use of its product development budget
and resources would be to develop larger screens. If, however, future analyses reveal that
customer value has shifted to a different feature—for example, audio quality—the
company may use that information to pivot its product development plans.

Advantages of Conjoint Analysis -

● Conjoint Analysis can be run easily using just one respondent - by just having 1
sample size
● One of the other advantages of such an analysis is that it can be done just with
Simple Regression

Limitations of Conjoint Analysis -

● It becomes difficult /complex when we have to consider a large number of attributes.

This is because when we have a large number of attributes to consider and each
having 2 levels or more - the calculation to find the best rank amongst the unique
combinations becomes very difficult for the one conducting the research
● Another limitation of conjoint analysis is that it is a psychological measurement due
to which accuracy can be a challenge. It is because the psychological factors will
vary from one individual to another, and likes and dislikes of any particular attribute
differ from one another.
For example: If we consider any product for example, for one person it can give him
pleasure and for another person, it can be a disfavour

Dataset which we have used -

(Drive link for dataset)

The dataset that we took - demands us to find the best utility that customers consider while
buying a pen. The attributes or the utilities that we have considered are:
- Weight Of the Pen (having three levels: 5-gram, 7 gram & 10 gram)
- Colour Of the Pen (having 3 levels: Code1: Red, Code 2: Blue. Code 3: Green)
- Tip Diameter of the Pen (3 levels: 0.25 mm, 0.45 mm, 0.50 mm)

Along with this we have a column consisting of the ratings by the potential customers that
was collected for research purposes.
 Best Utility Model - PEN

Weight of the Pen 5 grams 7 grams 10 grams

Colour of the Pen Code 1: Red Code 2: Blue Code 3: Green

Pen's Tip Diameter 0.25 mm 0.45 mm 0.50 mm

Solution -

After running a Simple Regression on excel we get the following results:

Coefficients

Intercept 19.97777778

weight_5 -6.422222222

weight_7 -1.177777778

colour_1 -2.422222222

colour_2 0.4222222222

tip_dia_25 -4.444444444

tip_dia_45 -3.888888889
 Variables Utility Utility'

weight_5 -6.422 -14.022

weight_7 -1.178 -8.778 Range of weight = 14.022

weight_10 7.600 0.000

colour_1 -2.422 -4.422

colour_2 0.422 -1.578 Range of Colour = 4.422

colour_3 2.000 0.000

tip_dia_25 -4.444 -12.778

Range of tip Tip Diameter=

tip_dia_45 -3.889 -12.222
12.778

tip_dia_50 8.333 0.000

Interpretation:

Among the attributes that are considered for the development of a pen, the weight and the
tip diameter are the two best features which have the highest utility. Thus, this implies that
customers while buying their Pens are looking for the correct weight of the pen and as well
as Tip diameter for their final purchase. While, the colour of the pen is not something that
needs to be favoured in or is important before making the buying decision for the customers
Utility Ranking:

Weight Colour Tip_Dia Total_Utility Rank

10.00 3.00 0.50 0.00 1
10.00 2.00 0.50 -1.58 2
10.00 1.00 0.50 -4.42 3
7.00 3.00 0.50 -8.78 4
7.00 2.00 0.50 -10.36 5
10.00 3.00 0.45 -12.22 6
10.00 3.00 0.25 -12.78 7
7.00 1.00 0.50 -13.20 8
10.00 2.00 0.45 -13.80 9
5.00 3.00 0.50 -14.02 10
10.00 2.00 0.25 -14.36 11
5.00 2.00 0.50 -15.60 12
10.00 1.00 0.45 -16.64 13
10.00 1.00 0.25 -17.20 14
5.00 1.00 0.50 -18.44 15
7.00 3.00 0.45 -21.00 16
7.00 3.00 0.25 -21.56 17
7.00 2.00 0.45 -22.58 18
7.00 2.00 0.25 -23.13 19
7.00 1.00 0.45 -25.42 20
7.00 1.00 0.25 -25.98 21
5.00 3.00 0.45 -26.24 22
5.00 3.00 0.25 -26.80 23
5.00 2.00 0.45 -27.82 24
5.00 2.00 0.25 -28.38 25
5.00 1.00 0.45 -30.67 26
5.00 1.00 0.25 -31.22 27

Interpretations:

● After finding the best utility for the Pen, we rank the best unique combination using all the
three attributes we have
● According to the utility ranking, a pen of 10 gm, Green colour and 0.50 mm tip diameter
is the best combination of features that customers value the most
Managerial Implications -
● After finding out the utility of any product and gaining the insight of what their customers
will value for the product, the organisation can now design promotions & advertisements
leveraging the product benefits, in this case the weight and tip diameter of the pen

Example: These pens are more balanced, high definition, gives you clear handwriting & a
smooth and consistent ink flow

● Even while selling and advertising, the company can package these particular products by
highlighting the mentioned features - in such a way that the potential customers can clearly
observe the benefits while they are shopping. This would the product, the perfect
competitive advantage in the market, thus improving the sales of the product eventually.