Conjoint Analysis_Group G_Nishtha Verma

Consumers examine a range of features or attributes and then make judgements or trade-offs to determine their final purchase choice. Conjoint analysis examines these trade-offs to determine the combination of attributes that will be most satisfying to the consumer. In other words, by using conjoint analysis a company can determine the optimal features for their product or service.

Suppose a customer has to choose between a flight with regular seats, that costs $400 and takes 5 hours, or a flight which costs $700, has extra-wide seats and takes 3 hours. He has 8 combinations to choose from.

Choice	Seat Comfort	Price	Duration (hours)
1	Extra wide	$700	5
2	Extra wide	$700	3
3	Extra wide	$400	5
4	Extra wide	$400	3
5	Regular	$700	5
6	Regular	$700	3
7	Regular	$400	5
8	Regular	$400	3

A traveller may like the comfort and arrival time of a particular flight, but reject purchase due to the cost. In this case, cost has a high utility value. Utility can be defined as a number which represents the value that consumers place on an attribute. In other words, it represents the relative "worth" of the attribute. The following figure presents a list of hypothetical utilities for an individual consumer:

Duration Utility: 3 hours - 42; 5 hours - 22

Comfort Utility: extra-wide seats - 15; regular seats - 12

Cost Utility: $400 - 61; $700 - 5

Based on these utilities, we can make the following conclusions:

• This consumer places a greater value on a 3 hour flight (the utility is 42) than on a 5 hour flight.
  This consumer does not differ much in the value that he or she places on comfort. That is, the utilities are quite close (12 vs. 15). 
• This consumer places a much higher value on a price of $400 than a price of $700. 

The importance of an attribute can be calculated by examining the range of utilities (that is, the difference between the lowest and highest utilities) across all levels of the attribute

The range for each attribute is given below:

• Duration: Range = 20 (42-22)
• Comfort : Range = 3 (15-12)
• Cost : Range = 56 (61-5)

These ranges tell us the relative importance of each attribute. Cost is the most important factor in product purchase as it has the highest range of utility values. Cost is followed in importance by the duration of the flight.

Marketers can use the information from utility values to design products and/or services which come closest to satisfying important consumer segments.