What is Conjoint Analysis?

Conjoint Analysis is a sophisticated statistics-based marketing research technique used to understand customers’ preferences and choices.

When customers contemplate acquiring a product or service or hiring a certain vendor or provider there are many considerations that are taken into account.

These aspects include:

• Technical attributes such as product specifications and performance
• Functional attributes such as pricing, customer support and warranty
• Emotional attributes such as brand, design and reputation

Additionally, there are multiple levels within each attribute. For example, for the attribute of power sources, the levels may be lithium battery, rechargeable batteries or corded.

In general, asking questions about pricing and other attributes directly to customers fails to yield reliable results. That is because buyers will instinctively choose the best features and lowest pricing, which is an unrealistic combination. Therefore, in a Conjoint Analysis study we present a variety of product and service configurations to existing and potential customers and let them select their preferred choice. Instead of rating a single attribute, they choose the preferred configuration as a whole, such as in the example below:

After the results are collected, sophisticated statistics are then applied to measure the importance of each attribute in the buyer’s decision.

The two key measures that are derived from the survey are the Importance of each attribute and the Utility (also referred to as Part Worth Utility or Utility Score).

- Importance in Conjoint Analysis is represented by a percentage value that portrays the influence of each attribute on the customer's buying decision. A higher percentage represents greater importance in the customer’s eyes.

Example of Attribute Importance

-Utilities are scores used to describe which options within a given attribute are favored by customers. In the example below, 60-day refill frequency is strongly preferred by customers over 15, 30 and 45-day refill frequencies.

Example of Utilities

Once we have analyzed the Importance and Utilities, we can proceed to compare potential product and service configurations to identify the ones that are preferred by customers.

The total utility is calculated by simply adding the utility of each option selected in that configuration.

The following chart is an example of configurations that can result from analyzing the Importance and Utility data above:

Example of Product/Service Configurations

Conjoint Analysis is a powerful marketing research technique that delivers insights in a variety of areas. As a result of it, companies can make better strategic decisions and deliver products and services that are more attractive to customers and more profitable at the same time.

________________________________________________________________________

For more information, please reach out to MarketPrax here or at [email protected] to get started.