Conjoint Analysis - Part 1/3
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The document discusses different methods for measuring consumer preferences, including direct questioning, stated preferences, and revealed preferences such as purchase data. It notes problems with directly asking consumers about their preferences and intentions to buy. The document then introduces conjoint analysis as a technique that can provide more useful insights into how consumers make tradeoffs between product attributes and their relative attribute importance.
Conjoint Analysis - Part 1/3
- 1. Class Outline ⢠Measuring Consumer Preference â Problem with intentions-to-buy and self-reported methods â Conjoint Analysis
- 2. Preferences ⢠Intention to buy â too hard a question â overconfident about buying probability stated preferences ⢠Self-reported importance weights â lack of discrimination, everything is important ⢠Trade-offs â benefits and costs â what is desired most ⢠Actual purchase data â counts â sales force reports revealed preferences Consumer preferences
- 3. Stated intention-to-buy measures 50 durables non-durables % prob. of purchase 40 30 20 10 0 def. not prob. not maybe prob. yes Consumer def. yes preferences
- 4. How to Learn What Customers Want? ⢠Ask Direct Questions about preference : â What brand do you prefer? â How much RAM do you prefer? â How much hard disk space do you prefer? â What type of monitor do you prefer? â What price do you prefer? ⢠What is the problem with this?
- 5. Problems with Direct Questioning ⢠Answers are often trivial and unenlightening â âI prefer more processor speed to lessâ â âI prefer more RAM to lessâ â âI prefer more hard disk space to lessâ â âI prefer a lower price to a higher priceâ
- 6. More Discrimination from Trade-off Questions Traditional Approach Conjoint Study Average Importance Ratings Average Importance Ratings Brand Brand Scan Time Scan Time Resolution Resolution Price Price 0 2 4 6 8 10 0 10 20 30 40 50
- 7. Conjoint Analysis ⢠Useful in 1: Product design 2: Pricing 3: Segmentation and targeting
- 8. The conjoint world: terms and concepts ⢠⢠⢠⢠⢠⢠Attributes Attribute levels Profiles Utility models Part-worths Types of conjoint: ranking, rating, choice conjoint world
- 9. iPhone 5 Black & Slate White & Silver 16GB 32GB 64GB $199 $299 $399 ⢠Attribute:_________________________ ⢠Attribute level:_____________________
- 10. iPhone 5 Black & Slate White & Silver 16GB 32GB 64GB $199 $299 $399 ⢠Attribute: Brand, Memory, Price, Color ⢠Attribute level: Apple/Samsung, 16GB/32GB/64GB, $199/$299,$399, Black/White
- 11. Conjoint Analysis ⢠Conjoint Analysis: A technique that enables a researcher to estimate consumersâ valuations of different attributes â Allows us to understand how consumers make trade-offs among attributes of products and services â How much are consumers willing to pay for different attributes?
- 12. Example: New Job Choice Location Salary Option 1 $70K Option 2 $80K
- 13. Conjoint Reveals What People Really Want What MBA's Said... Rank Based on Conjoint Salary 6th 1st Region of US 2nd 2nd Job Location 5th 3rd People/Culture 1st 4th Functional Area 3rd 5th Firm Growth 7th 6th Business Travel 8th 7th Opp. to Advance 4th 8th Job Attribute Consumer preferences
- 14. Conjoint Analysis - Intuition ⢠Force consumers to rank different bundles of attributes 1. C 2. E C 3. A D 4. F 5. B 6. D A B E F
- 15. Conjoint Analysis - Intuition ⢠Using the information contained in consumersâ rankings (or ratings), we can back out what their valuations of different attributes must be: 1. C 2. E 3. A 4. F 5. B 6. D Suppose both products C and E contains a certain attribute that is not found in A,F,B,D. Then the consumer probably has a high valuation for that attribute Suppose both products B and D contains a certain attribute that is not found in C,E,A,F. Then the consumer probably has a low valuation for that attribute
- 16. Conjoint Analysis: Procedure 1. âDesignâ a set of product concepts (profiles) - this will usually come in with collaboration with the engineering team 2. Ask respondents to rate/rank those product concepts 3. Based on the respondentsâ evaluations of the product concepts, figure out how much utility each attribute provides
- 17. Exercise: Smartphone Choice ⢠Three Attributes 1. Brand : Samsung 2. Memory : 10GB 3. Price : $150 Apple 20GB $200
- 19. Exercise: Smartphone Choice Brand Memory Price Ranking (Utility) Apple 20 150 8 Samsung 20 150 7 Apple 10 150 6 Apple 20 200 5 Samsung 10 150 4 Samsung 20 200 3 Apple 10 200 2 Samsung 10 200 1 ⢠8=Most Preferred; 1=Least Preferred
- 20. Exercise: Smartphone Choice Q1) Measure Brand Value Brand Memory Apple 20 Samsung 20 Apple 10 Apple 20 Samsung 10 Samsung 20 Apple 10 Samsung 10 Price 150 150 150 200 150 200 200 200 Utility 8 7 6 5 4 3 2 1 Average 1 2 2 1 1.5
- 21. Exercise: Smartphone Choice Q2) Memory Value Brand Memory Apple 20 Samsung 20 Apple 10 Apple 20 Samsung 10 Samsung 20 Apple 10 Samsung 10 Price 150 150 150 200 150 200 200 200 Utility 8 7 6 5 4 3 2 1 Average
- 22. Exercise: Smartphone Choice Q2) Memory Value Brand Memory Apple 20 Samsung 20 Apple 10 Apple 20 Samsung 10 Samsung 20 Apple 10 Samsung 10 Price 150 150 150 200 150 200 200 200 Utility 8 7 6 5 4 3 2 1 Average 2 3 3 2 2.5
- 23. Exercise: Smartphone Choice Q3) Price = xxx Utils. Brand Memory Apple 20 Samsung 20 Apple 10 Apple 20 Samsung 10 Samsung 20 Apple 10 Samsung 10 Price 150 150 150 200 150 200 200 200 Utility 8 7 6 5 4 3 2 1 Average
- 24. Exercise: Smartphone Choice Q3) Price = xxx Utils. Brand Memory Apple 20 Samsung 20 Apple 10 Apple 20 Samsung 10 Samsung 20 Apple 10 Samsung 10 Price 150 150 150 200 150 200 200 200 Utility 8 7 6 5 4 3 2 1 Average 3 4 4 3 3.5
- 25. Exercise: Smartphone Choice ⢠$50 = 3.5 (Utility or Ranking) ⢠Apple > Samsung 1.5 Util. = $( 21.4 ) ⢠20GB > 10GB 2.5 Util. = $( 35.7 )
- 26. Exercise: Smartphone Choice ⢠$50 = 3.5 (Utility or Ranking) ⢠Apple > Samsung 1.5 Util. = $( ) ⢠20GB > 10GB 2.5 Util. = $( )
- 27. Exercise: Smartphone Choice ⢠Three Attributes 1. Brand : Samsung Apple 2. Memory : 10GB 20GB 3. Price : $150 $200 (1.5) (2.5) (3.5) ⢠Most important attribute: ( Price ) ⢠Least important attribute: ( Brand )
- 28. Group Exercise â Rating Based Conjoint ⢠10=Most Preferred; 1=Least Preferred Brand Memory Price Rating Apple 20 150 10 Apple 10 150 8 Apple 20 200 6 Samsung 20 150 7 Apple 10 200 4 Samsung 10 150 5 Samsung 20 200 3 Samsung 10 200 1
- 31. 3. Price = XXX Rating Brand Apple Apple Apple Samsung Apple Samsung Samsung Samsung Memory 20 10 20 20 10 10 20 10 Price 150 150 200 150 200 150 200 200 Respondent1âs Rating 10 8 6 7 4 5 3 1
- 32. Group Exercise: WTP ⢠$50 = ( 4 ) units ⢠Apple > Samsung ( 3 ) units = $( 37.5 ) ⢠20GB > 10GB ( 2 ) units = $( 25 ) ⢠Most important attribute: ( Price ) ⢠Least important attribute: ( Memory )
- 33. Group Exercise: Attribute Importance Weights ⢠$50 = ( 4 ) units ⢠Apple > Samsung ( 3 ) units ⢠20GB > 10GB ( 2 ) units ⢠Q1) Partworth range: the difference between largest and smallest partworths for each attribute ⢠Q2) Importance weights: = partworth range / (sum of partworth range)
- 34. Group Exercise: Attribute Importance Weights Q1) Partworth range ⢠$50 difference: 4 units ⢠Apple > Samsung : 3 units ⢠20GB > 10GB: 2 units Sum of partworth range = 4 + 3 + 2 = 9 Q2) Importance weights: ⢠Price = 4/9 = 44.4% ⢠Brand = 3/9 = 33.3% ⢠Memory = 2/9 = 22.2%