Conjoint analysis

Use this tool to run a Full Profile Conjoint analysis. This tool is included in the XLSTAT-
Conjoint module; it must be applied on design of experiments for conjoint analysis generated
with XLSTAT-Conjoint.

Description
Conjoint analysis is a comprehensive method for the analysis of new products in a
competitive environment.

This tool allows you to carry out the step of analyzing the results obtained after the collection
of responses from a sample of people. It is the fourth step of the analysis, once the attributes
have been defined, the design has been generated and the individual responses have been
collected.

Full profile conjoint analysis is based on ratings or rankings of profiles representing products
with different characteristics. These products have been generated using a design of
experiments and can be real or virtual.

The analysis is done using two statistical methods:

- Analysis of variance based on ordinary least squares (OLS).

- Monotone analysis of variance (Kruskal, 1964) that uses monotonic transformations of the
responses to better adjust the analysis of variance (MONANOVA).

Both approaches are described in detail in the chapters "Analysis of variance" and "Monotone
regression (MONANOVA)" of the help of XLSTAT.

Conjoint analysis therefore provides for each individual what is called partial utilities
associated with each category of the variables. These utilities provide a rough idea of the
impact of each modality on the process of choosing a product.

In addition to utilities, conjoint analysis provides an importance associated with each

variable. It shows how each variable in the selection process associated with each individual
is important.

The full profile conjoint analysis details the results for each individual separately, which
preserves the heterogeneity of the results.

XLSTAT-Conjoint also proposes to make classifications on the individuals. Using the

utilities, XLSTAT-Conjoint will obtain classes of individuals that can be analyzed and be
useful for further research. Classification methods used in XLSTAT-Conjoint are the
agglomerative hierarchical classification (see the chapter on this subject in the help of
XLSTAT) and the k-means method (see the chapter on this subject in the help of XLSTAT).

Type of data

XLSTAT-Conjoint offers two types of input data for the conjoint analysis: rankings and
ratings. The type of data must be indicated because the treatment used is slightly different.

Indeed, with rankings, the best profile will have the lowest value, whereas with a rating, it
will have the highest value.

If the ranking option is selected, XLSTAT-Conjoint transforms the answers in order to reverse
this arrangement and so that utilities can be interpreted easily.

Interactions

By interaction is meant an artificial factor (not measured) which reflects the interaction
between at least two measured factors. For example, if we carry out treatment on a plant, and
tests are carried out under two different light intensities, we will be able to include in the
model an interaction factor treatment*light which will be used to identify a possible
interaction between the two factors. If there is an interaction between the two factors, we will
observe a significantly larger effect on the plants when the light is strong and the treatment is
of type 2 while the effect is average for weak light, treatment 2 and strong light, treatment 1
combinations.

To make a parallel with linear regression, the interactions are equivalent to the products
between the continuous explanatory values although here obtaining interactions requires
nothing more than simple multiplication between two variables. However, the notation used
to represent the interaction between factor A and factor B is A*B.

The interactions to be used in the model can be easily defined in XLSTAT.

Constraints

During the calculations, each factor is broken down into a sub-matrix containing as many
columns as there are categories in the factor. Typically, this is a full disjunctive table.
Nevertheless, the breakdown poses a problem: if there are g categories, the rank of this sub-
matrix is not g but g-1. This leads to the requirement to delete one of the columns of the sub-
matrix and possibly to transform the other columns. Several strategies are available
depending on the interpretation we want to make afterwards:
1) a1=0: the parameter for the first category is null. This choice allows us force the effect of
the first category as a standard. In this case, the constant of the model is equal to the mean of
the dependent variable for group 1.

2) an=0: the parameter for the last category is null. This choice allows us force the effect of
the last category as a standard. In this case, the constant of the model is equal to the mean of
the dependent variable for group g.

3) Sum (ai) = 0: the sum of the parameters is null. This choice forces the constant of the
model to be equal to the mean of the dependent variable when the design is balanced.

Note: even if the choice of constraint influences the values of the parameters, it has no effect
on the predicted values and on the different fitting statistics.

Generating a market

XLSTAT-Conjoint includes a small tool to automatically generate a market that is to be then

simulated using the XLSTAT-Conjoint simulation tool. This tool allows to build the market
table using the attributes names and the categories names. The obtained table can then be
used for simulation purposes in a conjoint simulation.

You only need to select the names of the attributes, the names of the categories in a table and
the number of products to include in the market (it is also possible to enter the products ID).

Once this information is entered into the dialog box, just click OK, and for each attribute of
each product, you will be asked to choose the category to add. When an entire product has
been defined, you can either continue with the next product or stop building the table and
obtain a partial market table.

Conjoint analysis in Excel tutorial

This tutorial will help you design and interpret a full profile conjoint analysis in Excel
using the XLSTAT statistical software.

What is Conjoint analysis

Conjoint analysis is a marketing method that allows to know the expectations of
consumers about a product and to model their choices - both crucial steps of a
marketing analysis. The conjoint analysis method is now extremely common in
marketing. Modeling of consumer choice is a key area of marketing. Conjoint
analysis is used to simulate competitive markets using a single analysis; it is its
biggest advantage.

Two methods of conjoint analysis are available: full profile conjoint analysis and
choice based conjoint analysis (CBC).
 XLSTAT-Conjoint analysis allows you to run through all the analytical steps of
conjoint analysis which can be divided into five steps:

1. Choice of the relevant factors and their levels to describe the products.

2. Generation of a design of experiments based on full factorial, fractional

factorial, or D-optimal.

3. Collection of the results in Microsoft Excel sheets.

4. Data analysis with specific regression methods - MONANOVA (monotone

regression), multinomial logit, conditional logit, etc.

5. Simulation of new markets with various methods: first choice, logit, Bradley-
Terry-Luce, randomized first choice.

These steps can be carried out both for a full profile conjoint analysis and for a
choice based conjoint analysis (CBC).

In this tutorial, we will develop the steps necessary for the implementation and
interpretation of a full profile conjoint analysis with XLSTAT.

Dataset and goal of this conjoint analysis tutorial

In this tutorial we will study a classic case of conjoint analysis: how to introduce a
new product in a competitive market.
More specifically, an ice cream shop wants to introduce a new ice cream. The
conjoint analysis will be used to answer to the following questions. What are the
characteristics that the ice cream should have in order to, first, please the greatest
number of people, and, second, gain market shares in an already competitive
market?

An Excel spreadsheet containing the data and results of this example can be
downloaded by clicking here.

The results are divided into different sheets:

1. Factors: this sheet contains the characteristics of the selected factors.

2. CJT Design: this sheet contains the profiles generated, and the rankings given
by the 15 individuals.

3. CJT Analysis: this sheet contains the results of conjoint analysis (CJT).

4. Market generator: this sheet contains the complete market to simulate.

5. Market Simulation: this sheet contains the results of the market simulation.

Choosing the factors

The first step is the choice of important characteristics that define an ice cream. This
is done in collaboration with experts in the ice cream market. The selected factors
are:

1. Flavor (Raspberry, Mango, Strawberry, Vanilla, Chocolate)

2. Packaging (Cone, Homemade waffle, Pint)

3. Is the ice cream Low fat (Low fat, Not low fat)?

4. Is the ice cream organic (Not organic, Organic)?

By permuting the different levels of these factors, one can get 180 different
combinations corresponding to 180 products. Judges (respondents) will not be able
to evaluate them all. Therefore we will use experimental designs to reduce the
number of products presented to the respondents. The obtained profiles will be
ranked by 15 interviewed people.

Profile selection
XLSTAT-Conjoint analysis uses experimental designs to select a number of profiles
and allow interviewed people to make their rankings.
Launch XLSTAT, click on the CJT icon and then click on Designs for conjoint
analysis.
A dialog box will then appear. You can now enter the name of the analysis, the
number of factors (four in our case) and the number of profiles to be generated
(10).

In the Factors tab, activate the select on a sheet option and select the data in the
Factors sheet. Do not select labels associated to each column.
In the Output tab, individual sheets are not activated since the use of these sheets
is not necessary for the tutorial. In a comprehensive analysis though, they can be
very useful in order to get the responses filled directly by respondents.

Once you click on OK, a new dialog box appears. This allows you to select a
specific fractional factorial design or to optimize the design (D-optimal). Here, we
used the optimize option.
Once you click the Optimize button, the calculations run and the results are
displayed.
The first table summarizes the generated model.

The second table shows the conjoint design starting with the profiles on the left
part. The right part of the table has to be filled with the rankings of
each respondent.
Filling the conjoint analysis tables
The conjoint design table can either be filled directly in the CJT design sheet after
interviewing individuals or using the individual sheets with automatic referencing of
results.

Interpreting the results

For the aim of this study, 15 individuals have been questioned about their ice cream
preferences. The survey answers can be found in the CJT design sheet and the
results of the analysis in the CJT Analysis sheet.
Once the conjoint design is filled with the responses, you are ready to run the
analysis. One option is to click on the button Run the analysis which automatically
launches the interface with loaded data.

Alternatively, you can click on CJT / Conjoint analysis.

To facilitate data selection and avoid to manually select the two required
datasets (Responses and Profiles), you can click on the magic stick. This will
automatically load the two datasets if the conjoint design has been generated with
XLSTAT and if the results sheet has not been manually modified (addition of rows or
columns,). A new window will pop up. Select any cell of the sheet containing the
design for conjoint analysis. In this example, we selected the cell H13 of the CJT
Design sheet. Then click OK.

You can also select your data manually. In the Responses field, select the 15
columns of the conjoint design corresponding to the individuals rankings (right part
of the table). In the Profiles field, select the columns associated to the different
profiles (excluding the profile names). Choose the ranking option as response type.

Once you click on the OK button, the computations are performed and the results
are displayed.
The most important results are the partial utilities as well as the individual
importances. These are caclulated at an individual level. They can be found in the
below tables.

Their averages are calculated and displayed on charts. These give an idea of the
importance of each factor.

We can conclude that flavor and packaging are the most important factors both at
the individual level and the average level. More specifically, chocolate or raspberry
flavour and homemade waffle packaging have a largely positive effect (average
utilities graph).
XLSTAT-Conjoint allows to segment respondents by using statistical clustering
methods. This option allows to see if homogeneous groups of individuals emerge.

Market simulation
The main advantage of conjoint analysis is that it allows to simulate a market even if
the products in the market have not been tested by the individuals.
In our case, the market for an ice cream is analyzed and we would like to know the
impact and market shares associated to a new product (named Product 4). This
product is an organic raspberry ice-cream which is not low fat and served in a
homemade waffle. We know that in today's market there are 3 ice-cream that have
different characteristics, the following table shows the simulated market:
This table will be needed for the market share simulation. In order to easily create
this table, you can use the Market generator tool as follow:

To generate the market table containing the different products, you need to select
the Variable information table displayed on the CJT Analysis sheet and indicate the
number of products you want to generate. Then click OK.

A new window pops up asking to choose the characteristics of each product. When
a product has been defined, you can either continue to the next one or stop
building the table. Usually, the new product we want introduce to the market is the
last one. In our case this is Product 4.
After the market generation, you can start the simulation. To do that, click on CJT
/ Conjoint analysis simulation tool.

You can then select the data.

In order to facilitate data selection and avoid to manually select the four datasets
required (Utilities, Variable information, Simulated market, Product ID), click on the
magic stick. This will automatically load the four datasets if the conjoint analysis and
the simulated market have been generated with XLSTAT and if the two worksheets
have not been manually modified (addition of rows or columns,). Then select any
cell of the sheet containing results of conjoint analysis and any cell of the worksheet
containing the market generated with XLSTAT. In this example, we select the cells
H13 of the CJT Analysis and Market Generator sheets. Then click OK.

You can also select your data manually: Utilities can be found in the CJT
Analysis sheet; the table of information about variables is obtained in the CJT
analysis sheet. The simulated market is in the Market generator sheet (do not select
the names of products). You can also select the name of the product just behind the
Product ID button. Select the Full profile model and the logit method for simulation.

Once you click on the OK button, the calculations are performed and the results are
displayed.
The table shows that the market share for the new product (product 4) is of 38%.
This result seems satisfactory in order to launch the product on the market.

In order to quickly evaluate the impact of other changing on the new product (you
may want to know what would be the market share if the flavor of the new product
is mango instead of raspberry), you can modify the categories of the last product
(blue row) in the Simulated market table by clicking on the categories you want to
change.

Once the categories are modified, you can click on the Run again button (just below
the simulated market table). Market shares and associated charts will be
automatically updated.

We can see on this example that market share slightly decreased with the mango
flavor. So it would be better to include a raspberry flavor in the new product.
Many more advanced analyses are possible with XLSTAT (use of segmentation
variables, weights, use of statistical clustering methods...).