Conjoint Analysis
Conjoint analysis presents choice alternatives between products/services defined by
sets of attributes. This is illustrated by the following choice: would you prefer a
flight with regular seats, that costs $400 and takes 5 hours, or a flight which costs
$700 has extra-wide seats and takes 3 hours? Extending this, we see that if seat
comfort, price and duration are the only relevant attributes, there are potentially
eight flight choices.
Choice Seat Comfort Price Duration
1 extra-wide $700 5 hours
2 extra-wide $700 3 hours
3 extra-wide $400 5 hours
4 extra-wide $400 3 hours
5 regular $700 5 hours
6 regular $700 3 hours
7 regular $400 5 hours
8 regular $400 3 hours
Given the above alternatives, product 4 is very likely the most prefered choice while
product 5 is probably the least preferred product. The preference for the other choices is
determined by what is important to that individual.
Conjoint analysis can be used to determine the relative importance of each attribute,
attribute level, and combinations of attributes. If the most preferable product is not feasible
for some reason (perhaps the airline simply cannot provide extra-wide seats and a 3 hour
arrival time at a price of $400) then the conjoint analysis will identify the next most
preferred alternative. If you have other information on travellers, such as background
demographics, you might be able to identify market segments for which distinct products
may be appealing. For example, the business traveller and the vacation traveller may have
very different preferences which could be met by distinct flight offerings.
You can now see the value of conjoint analysis. Conjoint analysis allows the researcher to
examine the trade-offs that people make in purchasing a product. This allows the reseacher
to design products/services that will be most appealing to a specific market. In addition,
because conjoint analysis identifies important attributes, it can be used to create advertising
messages that will be most persuasive.
In evaluating products, consumers will always make trade-offs. A traveller may like the
comfort and arrival time of a particular flight, but reject purchase due to the cost. In this
case, cost has a high utility value. Utility can be defined as a number which represents the
value that consumers place on an attribute. In other words, it represents the relative
"worth" of the attribute. A low utility indicates less value; a high utility indicates more value.
The following figure presents a list of hypothetical utilities for an individual consumer:
Duration Utility
3 hours 42
5 hours 22
Comfort Utility
extra-wide seats 15
regular seats 12
Cost Utility
$400 61
$700 5
Based on these utilities, we can make the following conclusions:
This consumer places a greater value on a 3 hour flight (the utility is 42) than on a 5
hour flight (utility is 22).
This consumer does not differ much in the value that he or she places on comfort. That is,
the utilities are quite close (12 vs. 15).
This consumer places a much higher value on a price of $400 than a price of $700.
The preceding example depicts an individual's utilities. Average utilities can be
calculated for all consumers or for specific subgroups of consumers.
These utilities also tell us the extent to which each of these attributes drives the decision to
choose a particular flight. The importance of an attribute can be calculated by examining the
range of utilities (that is, the difference between the lowest and highest utilities) across all
levels of the attribute. That range represents the maximum impact that the attribute can
contribute to a product.
Using the hypothetical utilities presented earlier, we can calculate the relative importance of
each of the three attributes. The range for each attribute is given below:
Duration: Range = 20 (42-22)
Comfort : Range = 3 (15-12)
Cost : Range = 56 (61-5)
These ranges tell us the relative importance of each attribute. Cost is the most important
factor in product purchase as it has the highest range of utility values. Cost is followed in
importance by the duration of the flight. Based on the range and value of the utilities, we
can see that seat comfort is relatively unimportant to this consumer. Therefore, advertising
which emphasizes seat comfort would be ineffective. This person will make his or her
purchase choice based mainly on cost and then on the duration of the flight.
Marketers can use the information from utility values to design products and/or services
which come closest to satisfying important consumer segments. Conjoint analysis will
identify the relative contributions of each feature to the choice process. This technique,
therefore, can be used to identify market opportunities by exploring the potential of product
feature combinations that are not currently available.
Choice Simulations
n addition to providing information on the importance of product features,
conjoint analysis provides the opportunity to conduct computer choice
simulations. Choice simulations reveal consumer preference for specific
products defined by the researcher. In this case, simulations will identify
successful and unsuccessful flight packages before they are introduced to
the market!
For example, let's say that the researcher defined three flights as follows:
Flight 1: $300 5 hours two stops meal
Flight 2: $400 4 hours one stop snack
Flight 3: $500 3 hours direct no meal
The conjoint simulation will indicate the percentage of consumers that prefer
each of the three flights. The simulation might show that consumers are
willing to travel longer if they can pay less and are provided a meal.
Simulations allows the researcher to estimate preference, sales and share
for new flights before they come to market.
Simulations can be done interactively on a microcomputer to quickly and
easily look at all possible options. The researcher may, for example, want to
determine if a price change of $50, $100, or $150 will influence consumer's
choice. Also, conjoint will let the researcher look at interactions among
attributes. For example, consumers may be willing to pay $50 more for a
flight on the condition that they are provided with a hot meal rather than a
snack.