CONJOINT ANALYSIS

What is Conjoint Analysis?

Multivariate technique
to understand how respondents develop preferences for

products or services.
Consumers evaluate the value or utility of a product /

service / concept / idea (real or hypothetical) by combining

the utility provided by each attribute characterizing the
product / service / concept / idea

What is Conjoint Analysis?

A decompositional method.
Respondents provide overall preference of combos of

attributes of products that are presented to them.

These evaluations are then used to infer the utilities of the

individual attributes comprising the products.

In many situations, this is preferable to asking respondents

how important certain attributes are, or to rate how well a

product performs on each of a number of attributes

Managerial uses of Conjoint Analysis

After determining the contribution of each attribute to the
consumers overall preference, one could
Define the product / service with the optimal combo of
features
Show the relative contributions of each attribute and each
level to the overall evaluation of the object
Isolate groups of customers who place differing importance
on different features
Identify marketing opportunities by exploring the market
potential for feature combos not currently available
Predict market shares of different products / services with
different sets of features

Commercial Applications
Technique is widely used by consumer and industrial product

companies, service companies, marketing research, advertising and

consulting firms
Over 400 commercial applications per year even in the mid 80s
Types of applications include
Consumer durables: automobiles, refrigerators, car stereos, food processors,

HDTV
Industrial products: copy machines, forklift trucks, computer software, aircraft
Consumer nondurables: bar soaps, hair shampoos, disposable diapers
Services: car rentals, credit cards, hotels, performance art series, rural health
care systems, BART
Other: MBA job choice

Steps in CA
Identification of respondents
Identification and definition of various attributes of products
Specification of attribute variation and levels
Creation of objects (experimental design)
Creation of instrument, including socioeconomic, demographic and usage

questions
Sampling plan
Data collection
Data analysis: Typically, regression analysis separately by respondent
Simulating aggregate choices
Market segmentation

Steps in the analysis

Each of the selected profiles is presented to respondent
Respondent indicates her / his preference for each of the profiles by:
Rank ordering the profiles, or
Rating them on a 1-100 scale, or
Choosing the most preferred alternative
Depending on the above, an ordinal regression (LINMAP), a regular

regression or a logit model is fitted to the data

Dependent variable is the preference measure. Independent variables

are dummy variables, i.e., presence / absence of each of the attributelevels

Estimated coefficient are called part worths

Simulating aggregate choices

Objective is to forecast likely market shares of attribute combos
which represent potential management actions, in a defined
competitive scenario
Translating Utilities into Choice Predictions

First Choice Rule

Highest utility profile chosen
by each respondent

Share of Preference Rule

Predict choice probabilities
using a model such as Logit

Both methods ignore marketing variables such as advertising weight

and distribution which are typically not in the conjoint design. Fix:
Adjust the market shares using this additional information

Using CA for segmentation

Two-Stage Approaches
A priori
Researcher selects
specific attributes

Post hoc
Full set of
attributes used

Clustering (K-means)

Relate clusters to background variables

such as demographics using techniques
like discriminant analysis

One-Stage Approach

Concomitant variable
Latent Class Conjoint
Simultaneous clustering
and profiling using
background characteristics

THANK YOU