CONJOINT ANALYSIS
Wes Friske
Xinchun Wang
Overview
• Definition
• History
• Formula
• Example for class
• SAS Demonstration
• Examples from multiple disciplines
• Question and answer session
Definition
Conjoint Analysis (kuh n-joint uh-nal-uh-sis):
• “Conjoint analysis is a multivariate technique developed
specifically to understand how respondents develop
preferences for objects (products, services, or ideas).”
• Source: Hair, Black, Babin, and Anderson (2009)
More on Conjoint Analysis
• Conjoint analysis can be used in almost any area in which
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decisions are studied.
Conjoint analysis assumes that any set of objects (e.g., brands,
companies) or concepts (e.g., positioning, images) is evaluated
as a bundle of attributes.
Most conjoint analysis studies use experimental designs.
Conjoint analysis is an exploratory technique; it is not used in
theory testing.
It can accommodate either a metric or non-metric dependent
variable.
Independent variables must be non-metric.
Sources: Hair et. al (2009) and Kuhfeld (2010)
History
• Conjoint analysis grew out of conjoint measurement in
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mathematical psychology.
Green and Rao (1971) and Rao and Wind (1975) were some of
the first academics to use conjoint analysis in a business
context—marketing research.
During the 1980s, conjoint analysis gained widespread
acceptance in many industries, with usage rates increasing up
to tenfold.
By the end of the 1990s, many other disciplines had adopted
conjoint analysis techniques.
Sources: Hair et. al (2009) and Kuhfeld (2010)
Formula
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An Interactive Example
• For this example, suppose that you have asked someone to rate
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his/her preferences for eight chocolate candies using a ninepoint Likert scale (with 1 = low preference, 9 = high
preference).
To complicate matters, the chocolate bars are all different.
Their exteriors are made of either dark chocolate or milk
chocolate; their fillings are chewy or soft; and some contain
nuts, others do not.
Your experiment is thus a full factorial (2 X 2 X 2) design.
Conjoint analysis is used to determine the importance of each
attribute and the respondent’s preferences for each type of
chocolate candy.
Source: Kuhfeld (2010)
SAS Code
• In SAS, PROC TRANSREG is used to perform metric and non-metric conjoint
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analysis.
The “separators = option” is used in constructing the labels for the partworth utilities in the displayed output.
The “short” option means that the iteration history will not be included in
the output.
Variable lists are specified in parentheses after a transformation name.
A transformation name must be specified for all variable lists, even when no
transformation is desired.
An equal sign follows the dependent variable specification, then the
attribute variables are specified along with their transformation.
The following specification designates the attributes as class variables with
the restriction that the part-worth utilities sum to zero within each
attribute: “class (chocolate center nuts / zero = sum)”.
A slash must be specified to separate the variables from the transformation
option “zero = sum”.
Source: Kuhfeld (2010)
SAS Output
• The part-worth utilities show the most and least preferred levels of the
attributes.
• Levels with positive utility are preferred over those with negative utility.
• The total utility for a candy (i.e., the respondent’s overall preference for a
candy) is the sum of the intercept and the part-worth utilities.
• Source: Kuhfeld (2010)
Conjoint Analysis in Marketing
In marketing, conjoint analysis has been used in…
• New product development
• Price sensitivity studies
• Segmentation
• Profitability analysis.
• Sources: Hair et. al (2009) and Kuhfeld (2010)
Conjoint Analysis in Other Disciplines
Accounting: Chalos, Cherian, and Dawn (1991), Contemporary Accounting Research
• Conjoint analysis was used to investigate the role of financial information disclosure on unionmanagement preferences for labor contract outcomes.
Economics: Ryan and Hughes (1998), Health Economics
• Conjoint analysis was applied to assess women's preferences for the management of miscarriage.
Finance: Zinkhan and Zinkhan (1994), Managerial Finance
• Conjoint analysis was used to measure managers’ utility functions regarding innovative capital
budgeting proposals.
Management: Priem (1992), Strategic Management Journal
• Conjoint analysis was used to examine the strategy-structure-environment alignment decision rules
of 33 CEOs.
Range, Wildlife, and Fisheries Science: Belkner, Dennis, Kittredge, and Willis (2000), Ecological
Economics
• Contingent valuation (CV) and conjoint analysis were used to estimate landowner’s willingness to pay
(WTP) for ecosystem management on non-industrial private forest land.
Supply Chain Management: Thun (2010), Journal of Supply Chain Management
• Conjoint analysis was used to examine the alignment of supply chain integration and IT integration
strategies.
A Quiz (in honor of Dr. Westfall)
• In the candy bar example, what is the most important attribute
of the candy bar, according to the respondent?
• Does the respondent prefer a chewy center or a soft center in
the candy bar?
• What is the predicted utility of the dark/soft/no nuts
combination?
• How close is this value to the respondent’s actual rating of the
dark/soft/no nuts candy bar?
References
• Hair, Joseph Jr., Black, William, Babin, Barry, & Anderson, Rolph.
(2009). Conjoint analysis. Multivariate Data Analysis. New York:
Prentice Hall.
• Kuhfeld, Warren. (2010). Conjoint analysis. Marketing Research
Methods in SAS. Cary, NC: SAS Institute Inc.
Questions?