WMST ASSIGNMENT

OF
CONJOINT ANALYSIS (BURMAN TEA COMPANY)

SUBMITTED BY:

RISHABH SINGLA
 SOLUTION

Case 20.1: Burman Tea Company Pvt. Ltd.

Ans.1 The utility model is estimated as by using output received from SPSS.

U = 7.0 – 3.429 X1 – 1.071 X2 + 3.071 X3 + 2.857 X4 + 1.571 X5 – 0.357 X6 + 0.714 X7

b0 = 7.0

b1 = -3.429

b2 = -1.071

b3 = 3.071

b4 = 2.857

b5 = 1.571

b6 = -0.357

b7 = 0.714

The dummy variable coefficient represents the difference in the part-worth (utility) for that level and

the part-worth for the base level. For attribute 1(sachet size), we have the following

α 11 – α 13= b1

α 12 – α 13= b2

An additional constraint is required since the part-worths are estimated on an interval scale which has an arbitrary

origin. The additional constraint looks like:

α 11 + α 12 + u13 = 0

The equations for sachet size are:

α 11 – α 13= -3.43

α 12 – α 13= -1.07

α 11 + α 12 + α 13 = 0

Solving these equations, we get

α 13 = 1.50

α 11 = -1.93

α 12 = 0.43
The equations for price are:

α 21 – α 24= 3.07 = b3

α 22 – α 24= 2.86 = b4

α 23 – α 24= 1.57 = b5

α 21 + α 22 + α 23 + α 24 = 0

Solving the above equations, we get

α 24 = -1.875

α 21 = 1.195

α 22 = 0.985

α 23 = -0.305

Similarly equations for the ‘sugar’ are

α 31 – α 32= b6 = -0.357

α 31 – α 32= 0

Solving the above equations, we get

α 32 = 0.178

α 31 = -0.179

Similarly equations for the ‘milk’ are:

α 41 – α 42= 0.714

α 41 + α 42= 0

Solving the above equations, we get

α 42 = -0.357

α 41 = 0.357

The relative importance of attributes indicates which attributes are important in influencing the choice of

consumers. The relative importance weights are calculated based on ranges of part-worths as follows:

Sum of ranges of part-worth’s = [1.50 – (-1.93)] + [1.195 – (-1.875)] + [0.178 – (-0.179)] +[0.357 – (-0.357)]

= 3.43 + 3.07 + 0.357 + 0.714

= 7.571

Relative importance of sachet size = [1.50−(−1.93 )]/7.571= 0.453

Relative importance of price = [1.95−(−1.875 )]/7.571=0.405

Relative importance of sugar =[0.178−(−0.179)]/7.571 =0.047

Relative importance of milk =[0.357−(−0.357)]/7.571=0.094

Result of Conjoint Analysis

Attribute Level Lever description Utility Relative

Importance
Sachet Size 3 3 Cups 1.5 0.453
2 2 Cups 0.43
1 1 Cups -1.93
Price 4 Rs. 21 -1.875 0.405
3 Rs.18 -0.305
2 Rs.14 0.985
1 Rs.12 1.195
Sugar 2 Without Sugar 0.178 0.047
1 With Sugar -0.179
Milk 2 Without Milk -0.357 0.094
1 With Milk 0.357

The above table gives the relative importance of various attributes. The order of importance is sachet

size, price, milk and sugar. The two very important attributes are sachet size and price with relative

importance of 45.3 and 40.5 percent respectively. The importance of milk and sugar are 9.4 and 4.7%

respectively.

The above table also gives the utilities of various levels corresponding to each attribute. The maximum

utility for the levels of attributes sachet size, price, sugar and milk are 3 cups, Rs. 12, without sugar and

with milk respectively. It is therefore suggested that this combination may be launched by the company

as this is the most important one.

Ans.2 The limitation of such an analysis is that this approach ignores the heterogeneity which may exist

among respondents. This is because average score of preference rating is taken.