Conjoint analysis

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Conjoint analysis, also called multi-attribute compositional models or stated preference analysis, is a statistical technique that originated in mathematical psychology. Today it is used in many of the social sciences and applied sciences including marketing, product management, and operations research.

[edit] Methodology

Conjoint analysis requires research participants to make a series of trade-offs. Analysis of these trade-offs will reveal the relative importance of component attributes. To improve the predictive ability of this analysis, research participants should be grouped into similar segments based on objectives, values and/or other factors.

The exercise can be administered to survey respondents in a number of different ways. Traditionally it is administered as a ranking exercise and sometimes as a rating exercise (where the respondent awards each trade-off scenario a score indicating appeal).

In more recent years it has become common practice to present the trade-offs as a choice exercise (where the respondent simply chooses the most preferred alternative from a selection of competing alternatives - particularly common when simulating consumer choices) or as a constant sum allocation exercise (particularly common in pharmaceutical market research, where physicians indicate likely shares of prescribing, and each alternative in the trade-off is the description a real or hypothetical therapy).

Analysis is traditionally carried out with some form of multiple regression, but more recently the use of hierarchical Bayesian analysis has become widespread, enabling fairly robust statistical models of individual respondent decision behaviour to be developed.

[edit] Example

A real estate developer is interested in building a high rise apartment complex near an urban Ivy League university. To ensure the success of the project, a market research firm is hired to conduct focus groups with current students. Students are segmented by academic year (freshman, upper classmen, graduate studies) and amount of financial aid received.

Study participants are given a series index cards. Each card has 6 attributes to describe the potential building project (proximity to campus, cost, telecommunication packages, laundry options, floor plans, and security features offered). The estimated cost to construct the building described on each card is equivalent.

Participants are asked to order the cards from least to most appealing. This forced ranking exercise will indirectly reveal the participants' priorities and preferences. Multi-variate regression analysis may be used to determine the strength of preferences across target market segments.