Conjoint Analysis

Suresh Malodia
MICA, Ahmedabad
Conjoint Analysis
• Conjoint analysis is a technique for measuring consumer preference
about the attributes--such as price or package design--of a product or
service. It relies on surveying subjects with a representative set of
attribute combinations--for example, a particular package design and
price--which the subjects rank or score according to preference.
Analysis then yields quantitative information that can be used to
model consumer preference for any combination of the attributes.
• A study utilizing conjoint analysis consists of choosing a
representative set of attribute combinations, administering them to a
group of subjects, and analyzing the rankings or scores recorded by
the respondents. In conjoint analysis, attributes are referred to as
factors, and attribute values--like a particular price or package design-
-are called levels
Conducting Conjoint Analysis

Formulate the Problem

Construct the Stimuli

Decide the Form of Input Data

Select a Conjoint Analysis Procedure

Interpret the Results

Assess Reliability and Validity

Formulate the Problem
• Identify the attributes and attribute levels to be used in constructing the
stimuli.
• The attributes selected should be salient in influencing consumer preference
and choice and should be actionable.
• A typical conjoint analysis study involves six or seven attributes.
• At least three levels should be used, unless the attribute naturally occurs in
binary form (two levels).
• The researcher should take into account the attribute levels prevalent in the
marketplace and the objectives of the study.
Construct the Stimuli
• In the pairwise approach, also called two-factor evaluations, the
respondents evaluate two attributes at a time until all the possible
pairs of attributes have been evaluated.
• In the full-profile approach, also called multiple-factor evaluations,
full or complete profiles of brands are constructed for all the
attributes. Typically, each profile is described on a separate index
card.
Conducting Conjoint Analysis
Decide on the Form of Input Data
The model estimated may be represented as:

U = b0 + b1X1 + b2X2 + b3X3 + b4X4 + b5X5 + b6X6

where

X1, X2 = dummy variables representing Sole

X3, X4 = dummy variables representing Upper
X5, X6 = dummy variables representing Price

For Sole the attribute levels were coded as follows:

X1 X2
Level 1 1 0
Level 2 0 1
Level 3 0 0
Sneaker Data Coded for
Dummy Variable Regression
Preference Attributes
Ratings Sole Upper Price
Y X1 X2 X3 X4 X5 X6

9 1 0 1 0 1 0
7 1 0 0 1 0 1
5 1 0 0 0 0 0
6 0 1 1 0 0 1
5 0 1 0 1 0 0
6 0 1 0 0 1 0
5 0 0 1 0 0 0
7 0 0 0 1 1 0
6 0 0 0 0 0 1
Conducting Conjoint Analysis
Decide on the Form of Input Data

The levels of the other attributes were coded similarly. The

parameters were estimated as follows:

b0 = 4.222
b1 = 1.000
b2 = -0.333
b3 = 1.000
b4 = 0.667
b5 = 2.333
b6 = 1.333

Given the dummy variable coding, in which level 3 is the base

level, the coefficients may be related to the part-worths:
 11 -  13 = b1
 12 -  13 = b2
Conducting Conjoint Analysis
Decide on the Form of Input Data
To solve for the part-worths, an additional constraint is necessary.
11 + 12 + 13 = 0
These equations for the first attribute, Sole, are:
 11 -  13 = 1.000
 12 -  13 = -0.333
11 + 12 + 13 = 0
Solving these equations, we get,

 11 = 0.778
 12 = -0.556
 13 = -0.222
Conducting Conjoint Analysis
Decide on the Form of Input Data
The part-worths for other attributes reported in Table
can be estimated similarly.
For Upper we have:
 21 -  23 = b3
 22 -  23 = b4
21 + 22 + 23 = 0

For the third attribute, Price, we have:

 31 -  33 = b5
 32 -  33 = b6
31 + 32 + 33 = 0
Conducting Conjoint Analysis
Decide on the Form of Input Data

The relative importance weights were calculated based on ranges

of part-worths, as follows:

Sum of ranges = (0.778 - (-0.556)) + (0.445-(-0.556))

of part-worths + (1.111-(-1.222))
= 4.668

Relative importance of Sole = 1.334/4.668 = 0.286

Relative importance of Upper = 1.001/4.668 = 0.214
Relative importance of Price = 2.333/4.668 = 0.500
Results of Conjoint Analysis
Level
Attribute No. Description Utility Importance

Sole 3 Rubber 0.778

2 Polyurethane -0.556
1 Plastic -0.222 0.286

Upper 3 Leather 0.445

2 Canvas 0.111
1 Nylon -0.556 0.214

Price 3 $30.00 1.111

2 $60.00 0.111
1 $90.00 -1.222 0.500
Example
Big Bazaar is interested in including a new carpet cleaner in their electronics segment and wants to examine the
influence of five factors on consumer preference—package design, brand name, price, a housekeeping seal, and a
money-back guarantee. There are three factor levels for package design, each one differing in the location of the
applicator brush; three brand names (Eureka Forbes, Glory, and Bissell); three price levels; and two levels (either no
or yes) for each of the last two factors. The following table displays the variables used in the carpet-cleaner study,
with their variable labels and values.

Variable name Variable label Value label

Size Size of machine Hand held, Small, Big
brand brand name Eureka Forbes, Glory, Bissell
price price $1.19, 1.39 & 1.59
seal Energy star ratings no, yes
money money-back guarantee no, yes

There could be other factors and factor levels that characterize carpet cleaners, but these are the only ones of interest to management.
This is an important point in conjoint analysis. You want to choose only those factors (independent variables) that you think most
influence the subject's preference (the dependent variable). Using conjoint analysis, you will develop a model for customer preference
based on these five factors.
Construct the Stimuli
• A special class of fractional designs, called orthogonal arrays, allow for
the efficient estimation of all main effects. Orthogonal arrays permit
the measurement of all main effects of interest on an uncorrelated
basis. These designs assume that all interactions are negligible.

• Generally, two sets of data are obtained. One, the estimation set, is
used to calculate the part-worth functions for the attribute levels.
The other, the holdout set, is used to assess reliability and validity.
Decide on the Form of Input Data
• For non-metric data, the respondents are typically required to provide
rank-order evaluations.
• In the metric form, the respondents provide ratings, rather than
rankings. In this case, the judgments are typically made
independently.
• In recent years, the use of ratings has become increasingly common.
• The dependent variable is usually preference or intention to buy.
However, the conjoint methodology is flexible and can accommodate
a range of other dependent variables, including actual purchase or
choice.
The basic conjoint analysis model may be represented by the
following formula:
m ki
U(X )  
i 1
 x
j 1
ij ij

where
U(X) = overall utility of an alternative
= the part-worth contribution or utility associated with
the j th level (j, j = 1, 2, . . . ki) of the i th attribute
(i, i = 1, 2, . . . m)
xjj = 1 if the j th level of the i th attribute is present
= 0 otherwise
ki = number of levels of attribute i
m = number of attributes

The model estimated may be represented as:

U = b0 + b1X1 + b2X2 + b3X3 + b4X4 + b5X5 + b6X6

Running the Analysis
CONJOINT PLAN='file specification'
/DATA='file specification'
/SEQUENCE=PREF1 TO PREF22
/SUBJECT=ID
/FACTORS=PACKAGE BRAND (DISCRETE)
PRICE (LINEAR LESS)
SEAL (LINEAR MORE) MONEY (LINEAR MORE)
/PRINT=SUMMARYONLY.
• The PLAN subcommand specifies the file containing the
orthogonal design—in this example, carpet_plan.sav.
• The DATA subcommand specifies the file containing the
preference data—in this example, carpet_prefs.sav. If you
choose the preference data as the active dataset, you can
replace the file specification with an asterisk (*), without the
quotation marks.
• The SEQUENCE subcommand specifies that each data point in
the preference data is a profile number, starting with the most-
preferred profile and ending with the least-preferred profile.
• The SUBJECT subcommand specifies that the
variable IDidentifies the subjects.
• The FACTORS subcommand specifies a model describing the
expected relationship between the preference data and the
factor levels. The specified factors refer to variables defined in
the plan file named on the PLAN subcommand.
Running the Analysis
CONJOINT PLAN='file specification'
/DATA='file specification'
/SEQUENCE=PREF1 TO PREF22
/SUBJECT=ID
/FACTORS=PACKAGE BRAND (DISCRETE)
PRICE (LINEAR LESS)
SEAL (LINEAR MORE) MONEY (LINEAR MORE)
/PRINT=SUMMARYONLY.
• The keyword DISCRETE is used when the factor levels are
categorical and no assumption is made about the relationship
between the levels and the data. This is the case for the
factors package and brand that represent package design and
brand name, respectively. DISCRETE is assumed by default.
• The keyword LINEAR, used for the remaining factors, indicates
that the data are expected to be linearly related to the factor. For
example, preference is usually expected to be linearly related to
price.
• The keywords MORE and LESS, following LINEAR, indicate an
expected direction for the relationship. Since we expect higher
preference for lower prices, the keyword LESS is used for price.
However, we expect higher preference for either a energy star
ratings of approval or a money-back guarantee, so the
keyword MORE is used for ratings and money (recall that the
levels for both of these factors were set to 1 for no and 2 for yes).
• The PRINT subcommand specifies that the output contains
information for the group of subjects only as a whole (SUMMARY
ONLY keyword). Information for each subject, separately, is
suppressed.
Utility Scores This table shows the utility (part-worth)
scores and their standard errors for each
factor level. Higher utility values indicate
Utility Estimate Std. Error greater preference
Size handheld -2.233 0.192
small 1.867 0.192 Since the utilities are all expressed in a
big 0.367 0.192 common unit, they can be added together to
Brand Eureka Forbes 0.367 0.192 give the total utility of any combination. For
Glory -0.350 0.192 example, the total utility of a cleaner with
Bissell -0.017 0.192 package design B*, brand Eureka forbes, price
Price $1.19 -6.595 0.988
$119, and no star ratings or money-back
guarantee is:
$1.39 -7.703 1.154
$1.59 -8.811 1.320 utility(package B*) + utility(K2R)
Sea; no 2.000 0.287 + utility($1.19) + utility(no seal)
yes 4.000 0.575 + utility(no money-back) + constant
money back no 1.250 0.287 or
yes 2.500 1.282
1.867 + 0.367 + (−6.595) + 2.000 + 1.250 +
12.870 = 11.759
This table shows the linear regression coefficients for those
factors specified as LINEAR. The utility for a particular factor
level is determined by multiplying the level by the coefficient.
For example, the predicted utility for a price of $1.19 was listed
as −6.595 in the utilities table. This is simply the value of the
price level, 1.19, multiplied by the price coefficient, −5.542

The range of the utility values (highest to lowest) for each

factor provides a measure of how important the factor was to
overall preference. Factors with greater utility ranges play a
more significant role than those with smaller ranges.