Team I - day 10 -Rajdeep (Marketing)

Understanding consumer behavior using conjoint analysis using example

(note the responses generated for results are as per a study paper on the internet)

Conjoint Method

First, select what attributes of the product you would like to test, and what the possibilities are for each attribute. To demonstrate, let's use the example of an ice cream shop, which might want to know consumer attitudes about:

• preferred flavor (vanilla, chocolate, strawberry, or black raspberry)
• price ($1.50, $2.00, $2.50, $3.00)
• container (cone, cup)
• freshness (homemade & fresh, factory-produced)
• healthiness (reduced fat, regular)

Is there a preferred flavor, or do customers like a variety? How much "extra" would someone be willing to pay more for a reduced-fat option? Do kids really prefer cones? How much do consumers value a neighborhood shop using fresh local ingredients?

The scientific way to answer these questions is to test each of the 5 attributes in the context of the others. To do that, we take each of these descriptors and create a series of "hypothetical" products, each with 5 attributes. The software creates templates for 16 (or 18 - depending upon the number of variables) of these, and we portray the description of the proposed product visually, on a "card", as shown to the right.

"Cards" can describe the product using words only - but can also use logos, pictures, or even smells or sounds. In any case, respondents will be asked to read each of the 16 "cards", and then assign a ranking of some kind (using numbers 1-x, or using adjectives like favorable, unfavorable, ideal, etc.)

Perhaps Card #1 is a factory-produced low-fat cheap vanilla cone. Maybe #2 is a homemade non-low-fat chocolate cup at a medium price point. The process goes on with 16 mathematically designed cards that offer all the relevant combinations of choices.

 

Conjoint Results

Given the consumers' ratings of all 16 diverse combinations, the software package computes a mathematical regression to tell us how important each of the five factors is to the individual responding consumer, and to the group of responding consumers as a whole.

According to the results shown to the left (actual output from the online survey), we'd know that consumer X bases 47% of his decision on price, 23% on the flavor, 19% on the freshness, and is less concerned about the container or healthiness. We also learn get a relative ranking of the different flavors, as shown in the lower graph.

In addition, each consumer will be asked a number of informational questions to create a demographic profile, so that we can compare the results and analyze them based upon income, age, location, and other variables that may affect consumer behavior towards a particular product.

Maybe older customers who eat ice cream regularly are more concerned about healthiness. Maybe younger consumers don't really care about the cone after all. Perhaps those who work in a nearby office building and pass by for a snack really appreciate the homemade fresh ingredients. All of these facts will be mathematically predicted using conjoint analysis.

The end result is a quantitative, robust analysis of what consumers really want, with each attribute evaluated in the context of the others, incorporating the trade-offs that ultimately project the greatest influence on consumer behavior.