Sunday, 4 September 2011

The Myriad Applications of Conjoint Analysis



Conjoint analysis is based on the fact that the relative values of attributes considered jointly can better be measured than when considered in isolation.

Application of Conjoint Analysis mainly includes,

1) Choosing the attributes and defining products relative to a set of attributes.

2) Understanding Respondent preference rankings.

3) Analysis of utilities correspondence to preferences, and

4) And how the utilities can be used to make decisions.

Applications of Conjoint Analysis:

Conjoint Analysis has been an important statistical tool to analyse

· Product design research

· Market segmentation Research

· Brand Equity Research

· Price Sensitivity Research

Product Design Research:

Product design research is the most common use of conjoint Analysis among marketing researchers. By knowing buyer’s preference for various product features, as well as the design and production costs associated with those factors, products can be designed that produce strongest preference among buyers while being profitable to the seller.

Market segmentation Research:

This analysis can be used in two ways in segmentation research.

The results can be compared across segments that already exist, which are priori segments or can be identified from the data collected in study itself, which are generally referred as post hoc or response based schemes, and due to strong relationships with the actual behaviour, the post hoc scheme is considered to be of greater managerial relevance. The post hoc approach can be clearly seen in the needs-based segmentation. In this case the consumers with similar preferences are grouped together. An example may be in telecommunication services, where a few are concerned with transmission quality, whereas the other may place importance on different offers/schemes that the company is providing. One standard output of conjoint analysis is relative to attribute importance, which communicates how much leverage a specific attribute will have in changing a particular buyer’s preference for that product. Using this approach, the company can examine its product portfolio, along with the needs of segments to identify the best current targets and the segments that represent the best market opportunity.

Brand Equity Research:

The above applications can also be used in the Brand equity research to understand, which is to identify the attributes and segments which the brands can target to increase their intangible value. By using this approach of analysis, pricing for equalisation for market shares can be determined. Even though this sort of equalisation does not help in coming up with business strategies, but can help in tracking the brand strength in comparison with the competitors.

Price Sensitivity Research:

Conjoint Analysis can be used to measure market’s price sensitivity towards a brand. Generally price sensitivity can be determined by using the price elasticity of demand.

In finance, conjoint analysis may be helpful in designing of new financial products and mutual funds, by deciding on the attributes of the financial products that maximise the utilities without compromising on the returns.

Author Name: Javed Ali Khan Pathan

Group: Finance - 2

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