Download - Lecture9 conjoint analysis
CONJOINT ANALYSIS
Prof Narayan Janakiraman
Customer Value Assessment Procedures
CustomerValue
Attitude-Based
Direct Questions
Unconstrained Constrained/Compositional Methods Multiattribute value analysis
Indirect/(Decompositional Methods) Conjoint analysis
Behavior-Based Inferential/Value-Based
Conjoint Analysis and Concept Testing
Concept testing Show one product concept and get overall “Purchase
Intent” feedback Also get product diagnostics
Conjoint Analysis Show multiple concepts and ask for overall
preference Concepts differ on Attributes and levels within an
attribute Based on overall preference get “part-worths” for
attributes and levels within an attribute
A Survey
Familiarity & usage of value assessment methods
58 industrial firms in the top 125 of the Fortune 500 list
16 market research firms from the top 40
Survey Results
Method Industrial Market Research
Familiarity % Usage % Familiarity % Usage %
Internal Engg.Assessment
61.3 42.5 - -
Field value-in-use 63.8 36.3 25 5
Focus group 92.5 60 90 60
Direct survey 91.3 48.8 85 55
Benchmarks 83.8 27.5 80 25
Conjoint 75 28.8 90 60
Compositionalmethods
45 10 40 5
Conjoint Analysis in Product Design
Should we offer our business travelers more room space or a fax machine in their room?
Given a target cost for a product, should we enhance product reliability or its performance?
Should we use a steel or aluminum casing to increase customer preference for the new equipment?
P&G and Disposable Diapers
Question: What value do consumers associate with two improved features in disposable diapers:
Improved absorbency
Elastic waistband
Conjoint Analysis Assumption Products can be defined by their
individual attributes and levels within the attribute
Consumer responses to the overall preference can be then partitioned to attributes
Eg. Packaged Soup
Eg. Packaged Soup individual concept
Eg. Packaged Soup Conjoint INPUTCards and Ratings
Eg. Packaged Soup Conjoint OUPUT 1Part Worths
Eg. Packaged Soup Conjoint OUPUT 1Part Worths
Weights of Attributes
Flavor 45%
Calories 25%
Salt Freeness 22%
Price 8%
Eg. Packaged Soup Conjoint OUPUT 2Importance
How were the part-worths calculated and how was the importance determined?
How does one usePart Worths?Importance?
The Black box
The Conjoint Model
attributes
utilitiesauauU ...)()( 21
Notebook computer example
1) Processing speed: 1.5 GHz or 2.5 GHz
2) Hard drive: 120 GB or 160 GB
3) Memory: 1 GB or 2 GB RAM
There are 8 different combinations of notebook - defined as product profiles:
One respondent’s preference
Input to computer system – dummy variable regression
Part Worth Estimation
Regression of ranks vs the attributes
U = a + b1*Processor + b2*Hard Drive + b3*Memory
U1 a b1 0 b2 0 b3 0 a
U2 a b1 1 b2 0 b3 0 a b1
U3 a b1 0 b2 1 b3 0 a b2
U4 a b1 0 b2 0 b3 1a b3
a U1 1
b1 U2 U1 5 14
b2 U3 U1 3 12
b3 U4 U1 2 11
The intution
Forecast preferences to check accuracy
8111
6101
4110
7011
3218
3217
3216
3215
bbbaU
bbbaU
bbbaU
bbbaU
Weightage and Relative Importance of Each Attribute
7
4
321
1 bbb
b
b2
b1 b2 b3
2
7
b3
b1 b2 b3
1
7
Processor Speed
Hard Drive
Memory
= 57%
= 29%
= 14%
Segment consumers based on preferences
Are there segments in terms of preferences?Here preference is the “basis” and “age” could be the descriptor
Eg. Packaged SoupWhich is the most important attribute & which is the best product to introduce?
Conjoint Simulation - The Motivation
1. What share can the new brand obtain?
2. Where does this share will come from?
Conjoint Simulation - The Principle
Before introduction share: A=40%, B=60%.
After introduction share: A=20%,B=50%, and New=30%.
Other ways of getting responses
Stage 1—Design the conjoint study:
Step 1.1: Select attributes relevant to the product or service category,Step 1.2: Select levels for each attribute, andStep 1.3: Develop the product bundles to be evaluated.
Stage 2—Obtain data from a sample of respondents:
Step 2.1: Design a data-collection procedure, andStep 2.2: Select a computation method for obtaining part-worth functions.
Stage 3—Evaluate product design options:
Step 3.1: Segment customers based on their part-worth functions,Step 3.2: Design market simulations, andStep 3.3: Select choice rule.
Conjoint Study Process
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Attributes Should Be…
Determinant Easily measured and communicated Controllable by the company Realistic Such that there will be preferences for
some levels over others Compensatory As a set, sufficient to define the choice
situation Without built-in redundancies
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How Many Levels per Attribute?
Levels and range should be meaningful, informative, and realistic to consumers and producers
Avoiding absurd configurations
Marginal increases in levels can greatly increase respondent’s task
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Which Data Collection Method? Full profile: Show complete list of attributes
Limited to 6-7 attributes
Pair-wise: Show pairs of attributes in matrix; each cell rated from most to least preferred Lacks realism Inconsistent responses likely
Designing a Frozen Pizza – Paired Comparison Approach
1. Crust 2. Type of Cheese 3. Price Pan Romano $ 9.99 Thin Mixed cheese $ 8.99 Thick Mozzeralla $ 7.99
4. Topping 5. Amount of Cheese Pineapple 2 oz. Veggie 4 oz. Sausage 6 oz. Pepperoni
A total of 324 (3 * 4 * 3 * 3 * 3) different pizzas can be developed from these options!