CONJOINT ANALYSIS

Wes Friske Xinchun Wang

Overview
Definition

History
Formula Example for class SAS Demonstration Examples from multiple disciplines Question and answer session

Definition
Conjoint Analysis (kuhn-joint uh-nal-uh-sis):
Conjoint analysis is a multivariate technique developed

specifically to understand how respondents develop preferences for objects (products, services, or ideas). Source: Hair, Black, Babin, and Anderson (2009)

More on Conjoint Analysis

Conjoint analysis can be used in almost any area in which

decisions are studied. Conjoint analysis assumes that any set of objects (e.g., brands, companies) or concepts (e.g., positioning, images) is evaluated as a bundle of attributes. Most conjoint analysis studies use experimental designs. Conjoint analysis is an exploratory technique; it is not used in theory testing. It can accommodate either a metric or non-metric dependent variable. Independent variables must be non-metric.

History
Conjoint analysis grew out of conjoint measurement in

mathematical psychology. Green and Rao (1971) and Rao and Wind (1975) were some of the first academics to use conjoint analysis in a business contextmarketing research. During the 1980s, conjoint analysis gained widespread acceptance in many industries, with usage rates increasing up to tenfold. By the end of the 1990s, many other disciplines had adopted conjoint analysis techniques.

Formula

An Interactive Example
For this example, suppose that you have asked someone to rate

his/her preferences for eight chocolate candies using a ninepoint Likert scale (with 1 = low preference, 9 = high preference). To complicate matters, the chocolate bars are all different. Their exteriors are made of either dark chocolate or milk chocolate; their fillings are chewy or soft; and some contain nuts, others do not. Your experiment is thus a full factorial (2 X 2 X 2) design. Conjoint analysis is used to determine the importance of each attribute and the respondents preferences for each type of chocolate candy.

SAS Code
In SAS, PROC TRANSREG is used to perform metric and non-metric conjoint

analysis. The separators = option is used in constructing the labels for the partworth utilities in the displayed output. The short option means that the iteration history will not be included in the output. Variable lists are specified in parentheses after a transformation name. A transformation name must be specified for all variable lists, even when no transformation is desired. An equal sign follows the dependent variable specification, then the attribute variables are specified along with their transformation. The following specification designates the attributes as class variables with the restriction that the part-worth utilities sum to zero within each attribute: class (chocolate center nuts / zero = sum). A slash must be specified to separate the variables from the transformation option zero = sum. Source: Kuhfeld (2010)

SAS Output
The part-worth utilities show the most and least

preferred levels of the attributes. Levels with positive utility are preferred over those with negative utility. The total utility for a candy (i.e., the respondents overall preference for a candy) is the sum of the intercept and the part-worth utilities.

Conjoint Analysis in Marketing

In marketing, conjoint analysis has been used in New product development Price sensitivity studies Segmentation Profitability analysis.

Conjoint Analysis in Other Disciplines

Accounting: Chalos, Cherian, and Dawn (1991), Contemporary Accounting Research Conjoint analysis was used to investigate the role of financial information disclosure on unionmanagement preferences for labor contract outcomes. Economics: Ryan and Hughes (1998), Health Economics Conjoint analysis was applied to assess women's preferences for the management of miscarriage. Finance: Zinkhan and Zinkhan (1994), Managerial Finance Conjoint analysis was used to measure managers utility functions regarding innovative capital budgeting proposals. Management: Priem (1992), Strategic Management Journal Conjoint analysis was used to examine the strategy-structure-environment alignment decision rules of 33 CEOs. Range, Wildlife, and Fisheries Science: Belkner, Dennis, Kittredge, and Willis (2000), Ecological Economics Contingent valuation (CV) and conjoint analysis were used to estimate landowners willingness to pay (WTP) for ecosystem management on non-industrial private forest land. Supply Chain Management: Thun (2010), Journal of Supply Chain Management Conjoint analysis was used to examine the alignment of supply chain integration and IT integration strategies.

Questions?