Conjoint Analysis

Utility, as you might recall, is central to the theory of conjoint analysis. It reflects how desirable or valuable an object is in the mind of the respondent, and is assessed from the value (part-worth) of its parts. Conjoint analysis examines respondents’ choices or ratings/rankings of products, to estimate the part-worth of the various levels of each attribute of a product.

 When used in the context of pricing research, conjoint analysis focusses mainly on two attributes — brand and price. The technique is used to compute part-worth for all brand and price levels, for each respondent. In the example shown in Exhibit 26.7, based on her choices, this particular respondent values the Toyota Corolla brand more than the Nissan Sunny and the Nissan Sunny more than Honda City and so on.

To establish what the respondent would choose in the scenario depicted in Exhibit 26.8, the brand/price option utility is computed by adding the part-worth of brand and price for each of the five options. In this case, the choice would be Nissan Sunny $54,000, because its utility is higher than that for the other four options.

Choices for individual respondents across the study’s price range are aggregated and weighted to yield the consumers’ share of preferences over the price range. This yields the demand price relationships for the brands, which may be used to estimate price elasticity and cross price elasticity of demand at the price points of interest to the marketer.

Toyota Corolla1.9$54,0000.8
Honda City0.4$58,0000.3
Nissan Sunny0.9$62,0000.1
Mitsubishi Lancer-0.6$66,000-0.5
Hyundai Avante-2.6$70,000-0.7

Exhibit 26.7   Part-worth for brand and price levels for a respondent.  

BrandPriceUtilityPart−Worth BrandPart−Worth Price
Toyota Corolla$70,0001.21.9-0.7
Honda City$58,0000.70.40.3
Nissan Sunny$54,0001.70.90.8
Mitsubishi Lancer$66,000-1.1-0.6-0.5
Hyundai Avante$54,000-1.8-2.60.8

Exhibit 26.8   Product utility computed for the above brand/price options, for the respondent in Exhibit 26.7.

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