WHAT IS CONJOINT ANALYSIS?

Conjoint analysis is a multivariate technique used specifically to understand how respondents develop preferences for products or services. It is based on the simple premise that consumers evaluate the value of a product/service/idea (real or hypothetical) by combining the separate amounts of value provided by each attribute. Utility, which is the conceptual basis for measuring value in conjoint analysis, is a subjective judgment of preference unique to each individual. It encompasses all product or service features, both tangible and intangible, and as such is a measure of overall preference. In conjoint analysis, utility is assumed to be based on the value placed on each of the levels of the attributes and expressed in a relationship reflecting the manner in which the utility is formulated for any combination of attributes. For example, we might sum the utility values associated with each feature of a product or service to arrive at an overall utility. Then we would assume that products or services with higher utility values are more preferred and have a better chance of choice.

UNIQUE ASPECTS OF CONJOINT ANALYSIS

Conjoint analysis is unique among multivariate methods in that the experimenter first constructs a set of real or hypothetical products or services by combining selected levels of each attribute. These combinations are then presented to respondents, who provide only their overall evaluations. Thus, the experimenter is asking the respondent to perform a very realistic task ” choosing among a set of products. Respondents need not tell the experimenter anything else, such as how important an individual attribute is to them or how well the product performs on any specific attribute. Because the experimenter constructed the hypothetical products or services in a specific manner, the influence of each attribute and each value of each attribute on the utility judgment of a respondent can be determined from the respondents' overall ratings.

To be successful, the researcher must be able to describe the product or service in terms of both its attributes and all relevant values for each attribute. We use the term factor when describing a specific attribute or other characteristic of the product or service. The possible values for each factor are called levels. In conjoint terms, we describe a product or service in terms of its level on the set of factors characterizing it. For example, brand name and price might be two factors in a conjoint analysis. Brand name might have two levels (brand X and brand Y), whereas price might have four levels (39, 49, 59, and 69 cents). When the researcher selects the factors and the levels to describe a product or service according to a specific plan, the combination is known as a treatment or stimulus. Therefore, a stimulus for our simple example might be brand X at 49 cents .

USES OF CONJOINT ANALYSIS

The flexibility of conjoint analysis gives rise to its application in almost any area in which decisions are studied. Conjoint analysis assumes that any set of objects (e.g., brands, companies) or concepts (e.g., positioning, benefits, images) is evaluated as a bundle of attributes. Having determined the contribution of each factor to the consumer's overall evaluation, the marketing researcher could then:

1. Define the object or concept with the optimum combination of features

2. Show the relative contributions of each attribute and each level to the overall evaluation of the object

3. Use estimates of purchaser or customer judgments to predict preferences among objects with differing sets of features (other things held constant)

4. Isolate groups of potential customers who place differing importance on the features to define high and low potential segments

5. Identify marketing opportunities by exploring the market potential for feature combinations not currently available

The knowledge of the preference structure for each individual allows the researcher almost unlimited flexibility in examining both individual and aggregate reactions to a wide range of product- or service- related issues.