Tuesday, 6 September 2011

Conjoint Analysis

Conjoint Analysis is concerned with understanding how people make choices between products or services or a combination of product and service, so that businesses can design new products or services that better meet customers’ underlying needs.

Conjoint Analysis has become one of the most widely accepted and used quantitative methods. It is used to measure the various features that people perceive in a product. It is also used to learn how demand for a particular product or service is related to its price and to forecast the likely acceptance of the product in the market.

The objective of conjoint analysis is to determine what combination of a limited number of attributes is most influential on respondent choice or decision making. A controlled set of potential products or services is shown to respondents and by analyzing how they make preferences between these products, the implicit valuation of the individual elements making up the product or service can be determined. These implicit valuations can be used to create market models that estimate market share, revenue and even profitability of new designs.

The concept is frequently used in customer acceptance for new product design, in assessing the appeal of advertisements and in service design. Consumers evaluate a product’s value by combining the separate utilities of each attribute.

The most desirable product is the one that has the most desirable bundle of benefits and attributes. Different segments have different preferences for different attributes- the job is to figure out what these preferences are for the target.

By constructing a set of hypothetical products by combining the different attributes at different levels will show not just the attributes but also how much of an attribute is desired and how important that attribute is relative to all other possibilities.

Conjoint analysis is a sophisticated technique and there are technical issues that need to be considered. In particular, the design of attributes is a crucial step in a conjoint project as choices between poorly defined levels can render the exercise meaningless.

You should also be aware that there are different flavours of conjoint analysis depending on the application. Adaptive Conjoint Analysis (ACA) is the most common, but there is also Choice-based and Full-profile Conjoint Analysis.

Posted by: Mohit Gupta

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