CONJOINT ANALYSIS

 Conjoint analysis is a statistical technique used

in market research to determine how people
value different features that make up an
individual product or service.
 It is a technique which deals with customer
preferences.
 It is sometimes referred to as trade-off analysis.
KEY TERMS
 ATTRIBUTES:
An attribute is a general feature of product or service say
size, colour, speed , delivery time etc.
 LEVELS:
Each attribute is then made of specific levels. So for the
attribute colour the level may be red, green, blue and so on.
 UTILITY:
An individual’s subjective preference judgment representing
the holistic value or worth of a specific object.
 PART-WORTH:
Estimate from the conjoint analysis of the overall
preference or utility associated with each level of each
factor used to define the product or services.
 The objective of conjoint analysis is to determine what
combination of a limited number of attributes is most
influential on respondent choice or decision making.
 Conjoint analysis takes these attributes and level
descriptions of product/ service by asking people to
make number of choices between different products.
 EXAMPLE:
Phone A Phone B
Weight 200g 120g
Battery life21 hours 10 hours
Price £70 £90
 Researchers can work out numerically (from the
responses) how valuable each of the level is
relative to others around it i.e. UTILITY.
 We can also work across attributes to see which
attributes make have the greatest impact in making
the choice.
APPROACHES OF CONJOINT
ANALYSIS
 There are two approaches for Conjoint
Analysis:
1. Multi-Factor Evaluation Approaah
2. Two- Factor Evaluation Approach
MULTI-FACTOR EVALUATION
APPROACH
 Defines different product profiles by taking all
the factors together.
 Consider an example with three attributes each
with levels as follows:

BRAND COLOUR PRICE

A RED 50

B BLUE 100

C 150
 All possible combinations that can be formed
3 BRANDS X 2 COLOURS X 3 PRICES= 18.
 Now each product profile is written on a card and
shown to customer to seek his overall preference
about the product.
TYPES OF PREFERENCE VALUES
1. INTERVAL SCALED:
Respondent is expected to give an overall
preference value in a scale from 0 to 10.
 0-no interest to buy the product
 10-high interest to buy the product
2.ORDINAL SCALED:
Respondent is expected to rank the product
 1-Most desirable
 18-Least desirable
CARD BRAND COLOUR PRICE PREFERENCE
S
1 A RED 50 5
2 A RED 100 5
3 A RED 150 0
4 A BLUE 50 8
5 A BLUE 100 5
6 A BLUE 150 2
7 B RED 50 7
8 B RED 100 5
9 B RED 150 3
10 B BLUE 50 9
11 B BLUE 100 6
12 B BLUE 150 5
13 C RED 50 10
14 C RED 100 7
15 C RED 150 5
16 C BLUE 50 9
17 C BLUE 100 7
DATA ORGANIZATION & CODING
 Next step is to code the data in an
appropriate manner for estimating uitlities
using multiple regression.
 We can use Dummy Coding for
independent variables
1-Reflects presence of a feature
0-Reflects absence of a feature
 Brands can be code in 3 separate columns
 Colours in 2 separate columns
 Price in 3 separate columns
CARD A B C RED BLUE 50 100 150 PREF
EREN
CES
1 1 0 0 1 0 1 0 0 5

2 1 0 0 1 0 0 1 0 5

3 1 0 0 1 0 0 0 1 0

4 1 0 0 0 1 1 0 0 8

5 1 0 0 0 1 0 1 0 5

6 1 0 0 0 1 0 0 1 2

7 0 1 0 1 0 1 0 0 7

8 0 1 0 1 0 0 1 0 5

9 0 1 0 1 0 0 0 1 3

10 0 1 0 0 1 1 0 0 9

11 0 1 0 0 1 0 1 0 6

12 0 1 0 0 1 0 0 1 5

13 0 0 1 1 0 1 0 0 10
PART WORTH ARE
CALCULATED USING
MULTIPLE REGRESSION

Part Worth of A = 3.00

Part Worth of Red = 1.75
Part Worth of $50 = 0.75
Total Part Worth = 5.25 (estimated value)
CARD BRAND COLOUR PRICE PREFERENCES
ACTUAL ESTIMATED
1 A RED 50 5 5.25
2 A RED 100 5 5.50
3 A RED 150 0 0
4 A BLUE 50 8 8.25
5 A BLUE 100 5 5.25
6 A BLUE 150 2 2.75
7 B RED 50 7 6.75
8 B RED 100 5 5.50
9 B RED 150 3 2.75
10 B BLUE 50 9 8.75
11 B BLUE 100 6 6.25
12 B BLUE 150 5 5.75
13 C RED 50 10 9.75
14 C RED 100 7 6.75
15 C RED 150 5 5.25
16 C BLUE 50 9 8.75
STEPS INVOLVED( INTERVAL
SCALED)
1. Select the required number of product profiles.
2. Administer these product profiles to a respondent
and obtain his/ her preferences value in a 0-10 scale
3. Obtain part worths of the levels of each factor using
multiple regression
4. Obtain estimated preferences value using part
worths.
5. Repeat step 2 & step 4 for necessary number of
respondents.
6. By comparing the estimated preference values of the
product profiles of different respondents, identify
possible market segments.
TWO FACTOR EVALUATION
APPROACH
 If the number of factors is very high then it is
difficult to use multiple factor evaluation
approach.
 In such a case Two Factor Evaluation
Approach is used. In this a combination of
two factors are taken one at a time.
 Again consider the same example
 Now total no. of two factor tables would be
n(n-1)/2, where n is total no. of attributes.
3(3-1)/2=3
 Two factor tables can be formed as
 Brand x Colour
 Brand x Price
 Price x Colour
TWO FACTOR TABLE FOR BRAND X PRICE

BRAND
PRICE A B C
$50
$100
$150

 Now respondents has to rank all the 9

combinations of the levels from 1 to 9
 1-Most desirable product profile
 9-Least desirable product profile
 BRAND
PRICE A B C
$50 1 2 4
$100 3 5 7
$150 6 8 9

Similar two factor tables for other attributes are

BRAND X COLOUR

BRAND
COLOUR A B C
RED BLUE 1 2 4
3 5 6
 After collecting rank for all the two factor
tables, part- worth of each of the levels is
determined.
 Now estimated preference value of a cell in
two factor table is calculated by adding part
worth values of the corresponding levels
(rows &columns) of that cell.
STEPS OF TWO FACTOR APROACH
1. Determine the number of two factor tables for the given
number of factors.
2. Administer all n(n-1)/2 two factor tables one by one to the
respondents and obtain his ranks.
3. Obtain part worth using multiple regression
4. Obtain estimated ranks of each cell which is sum of part
worth of the corresponding levels (row & column) of that
cell.
5. Repeat step 2 through step 4 for necessary number of
respondents.
6. By comparing the estimated ranks of all the two factor
tables of different respondents, identify possible market
segments.