Conjoint Analysis

MBA-BM (2022-24, Sec- A&B)

Prof. Nirali Shah

E-mail: nirali@xim.edu.in
 Conjoint analysis

• A common problem of a marketing executive

• How do consumers evaluate various tangibles and intangible attributes offered by a
particular product?

• Both marketers and consumers make trade-offs

• Conjoint analysis helps in

• Determining relative importance of various product attributes
• Determining the values attached to different levels of these attributes

• Notion that relative value of a product can be measured jointly (Bajpai 2015, 452)
 Main idea behind conjoint analysis

• How much are specific “attributes” of a product or service valued?

• What “levels” of each attribute should the product or service have?

• How do consumers tend to “trade off” different features (i.e., levels of attributes)?

What is it used for?

• To predict preferences
• To figure out the optimal attribute mix / product design
 Conjoint versus test markets

• Conjoint is far less expensive, quicker, and more flexible than test market.

• Conjoint is often considered a premarket testing methodology

• Before developing a physical prototype
• Before engaging the actual sales force
 Conjoint analysis: Managerial questions and application areas
Managerial questions
Product Which attributes do consumers
development consider most important?
Which attribute levels are
especially valued?
Competitive What effect will this new product
positioning have on an existing market?
What would be a good product
positioning for a hypothetical new
product?
Application area
In an ad campaign, which
product features should be
highlighted?
In designing a single new product,
how much each of the important
features needs to be supplied?
If we already have three products in
this category, what will happen if we
bring in the fourth one? Could overall
profits drop or rise?
How does the choice probability of
this product change if we modify its
appearance, ad message, etc.?
Feinberg, Kinnear, and Taylor (2013, 537)
 Conjoint analysis: Managerial questions and application areas
Managerial questions
Market Do consumer groups
segmentation exist with markedly
different tastes?
How many product
variants are needed to
cover the entire market?
Brand equity What is the value of a
particular brand name,
as an attribute?
What are the effects of going
with a new or umbrella
branding strategy?
Application area
Can we cluster the part to see whether there are
natural customer segments? How can we
characterize them, and reach them with
advertising message?
Can we determine whether we should bring
out a single product, or an entire line?
What happens to our product in a conjoint study
if we re-run it with a generic name, or that of
our competitor?
Should we go to market with an existing brand
name, a new name, or perhaps that of the parent
organization?
Feinberg, Kinnear, and Taylor (2013, 537)
 Conjoint analysis: Assumptions and limitations

• Consumers evaluate alternatives

• Consumers make trade-offs
• Consumers react to stimuli in conjoint which otherwise might have been ignored
• One can identify all the attributes that contribute to the utility of the product
• All the attributes are independent
• For distribution, it assumes that all SKUs equally available in all stores every time
• For promotion, it measures short-term response and ignores long-term effects
 Conjoint analysis: Associated terms and statistics

• Part-worth /utility functions: the utility consumers attach to the levels of each attribute

• Relative importance weights: estimated and they indicate which attributes are
important in influencing consumer choice

• Attribute levels: denote values assumed by the attributes

 Conjoint analysis: Associated terms and statistics

• Fractional factorial designs: to reduce the number of comparisons

• Orthogonal arrays: a special class of fractional designs that enable the

efficient estimation of all main effects

• Internal validity: this involves correlations of the predicted evaluations for

the holdout or validation stimuli with those obtained from the respondents
 Conjoint analysis: Types

• Choice-based conjoint

• Orthogonal design

• Adaptive conjoint
 Choice-based conjoint

• Respondents make the sort of trade-offs they normally do in their heads,

reporting only the item that they choose

• No ranking, rating, or reporting of utility points involved

• Benefits
• More real than other conjoint tasks
• Transparent and easy for respondents
 Choice-based conjoint

Which of these recliners

or recline chairs would
you purchase?

None
If these were the only
choices, I would defer
my purchase.
 Orthogonal designs

• It allows researchers to offer a subset of, rather than all, possible combinations

• It works because correlation between attributes presented is zero

 Adaptive conjoint

• Avoid wasting time and resources seeking unimportant information from an

insensitive/ uninterested respondent

• Question about only those trade-offs that more relevant to that respondent

• Motivating idea:
• Prior choices/responses help in determining later questions for future comparisons

• Benefits:
• To quickly zero in on accurate utility measurement for a particular respondent
• Suitable in case of many attribute levels

• Requires specialized software, dedicated lab facilities, and trained researchers to run
 Conjoint analysis

Formulate the problem

Construct the stimuli

Decide on the form of input data

Select a conjoint analysis procedure

Interpret the results

Assess the reliability and validity