Day 10 - Team G - Adarsh Kumar

Conjoint Analysis

What is Conjoint Analysis?

Conjoint analysis is a method for consumers to assign value to various features of a product or service. This research technique simulates the consumer choice decision, usually in a written questionnaire. The product designer and brand manager can identify the features or attributes that create the perceived value for the product. In turn, this can support further product design, pricing strategies, and marketing plans. This versatility has led to the wide adoption of conjoint analysis.

How does it work?

The key concept underlying conjoint analysis is that products and services can be broken down into attributes. For example, a car maybe visualized in terms of its attributes such as fuel efficiency, acceleration, seating style, and trunk capacity. Some attributes are objective, such as gas mileage; others are subjective, such as styling.

Once the attributes are identified, the next is to classify each attribute into a number of levels. Fuel efficiency can be described as a specific number such as 7 liters per 100 kilometers (or 25 miles to the gallon) or in categories such as high, medium and low. Styling attributes maybe described as family, sporty and retro.

Consumers must share an understanding of these terms. If attributes and their levels are not meaningful to the respondents, the results will be disappointing. Qualitative techniques, such as focus groups are an important part of exploring consumer understanding of the terms used to describe attributes and levels.

Benefits of Conjoint Analysis

• Conjoint analysis allows a considerable saving in required sample size. Successful analysis can be accomplished with 50 – 100 respondents, implying that five focus groups can support this advanced quantitative technique. The respondent provides several observations on each attribute, and so the “effective sample size” is dramatically enhanced by conjoint procedures.

• Conjoint analysis allows simultaneous rating of attributes and levels, while other techniques tend to only allow pair-wise comparisons.

• The questionnaire simulates the purchase decision, and respondents find it more realistic. Managers can experiment with prices and product attributes to “fine-tune” their product and service line.

Limitations of Conjoint Analysis

• The number of attributes and levels is restricted. No more than 10 – 15 packages can be realistically rated, since this overburdens the respondent. The number of packages is determined by the number of levels in an attribute.

• Products and especially services may be hard to describe with attributes and levels. This technique only works when consumers have a common understanding of how the attributes and levels combine to produce a valid description of a product or brand.

Conclusion

Understanding the needs and preferences of your consumers is the key to success. Whether the objective is to design a new product or to modify or evaluate a current one, conjoint analysis is a powerful tool that has become standard in firms offering advanced marketing research.