Research Methodology - Factor Analysis And Conjoint Analysis
CONJOINT ANALYSIS - Factor Analysis And Conjoint Analysis
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Everything in the world is undergoing a change. There is a proverb saying that “the old order changes, yielding place to new”.
CONJOINT ANALYSIS
Everything in the world is undergoing a change. There is a proverb saying that “the old order changes, yielding place to new”. Due to rapid advancement in science and technology, there is fast communication across the world. Consequently, the whole world has shrunk into something like a village and thus now-a-days one speaks of the “global village”. Under the present set-up, one can purchase any product of his choice from whatever part of the world it may be available. Because of this reason, what was a seller’s market a few years back has transformed into a buyer’s market now.
In a seller’s market of yesterday, the manufacturer or the seller could pass on a product according to his own perceptions and prescriptions. In the buyer’s market of today, a buyer decides what he should purchase, what should be the quality of the product, how much to purchase, where to purchase, when to purchase, at what cost to purchase, from whom to purchase, etc. A manager is perplexed at the way a consumer takes a decision on the purchase of a product. In this background, conjoint analysis is an effective tool to understand a buyer’s preferences for a good or service.
A product or service has several attributes. By an attribute, we mean a characteristic, a property, a feature, a quality, a specification or an aspect. A buyer’s decision to purchase a good or service is based on not just one attribute but a combination of several attributes. i.e., he is concerned with a join of attributes.
Therefore, finding out the consumer’s preferences for individual attributes of a product or service may not yield accurate results for a marketing research problem. In view of this fact, conjoint analysis seeks to find out the consumer’s preferences for a ‘join of attributes’, i.e., a combination of several attributes.
Let us consider an example. Suppose a consumer desires to purchase a wrist watch. He would take into consideration several attributes of a wrist watch, namely the configuration details such as mechanism, size, dial, appearance, colour and other particulars such as strap, price, durability, warranty, after-sales service, etc. If a consumer is asked what the important aspect among the above list is, he would reply that all attributes are important for him and so a manager cannot arrive at a decision on the design of a wrist watch. Conjoint analysis assumes that the buyer will base his decision not on just the individual attributes of the product but rather he would consider various combinations of the attributes, such as
‘mechanism, colour, price, after-sales service’,
or ‘dial, colour, durability, warranty’,
or ‘dial, appearance, price, durability’, etc.
This analysis would enable a manager in his decision making process in the identification of some of the preferred combinations of the features of the product.
The rank correlation method seeks to assess the consumer’s preferences for individual attributes. In contrast, the conjoint analysis seeks to assess the consumer’s preferences for combinations (or groups) of attributes of a product or a service. This method is also called an ‘unfolding technique’ because preferences on groups of attributes unfold from the rankings expressed by the consumers. Another name for this method is ‘multi-attribute compositional model’ because it deals with combinations of attributes.
The development of conjoint analysis comprises of the following steps:
1. Collect a list of the attributes (features) of a product or a service.
2. For each attribute, fix a certain
number of points or marks. The more the number of points for an attribute, the
more serious the consumers’ concern on that attribute.
3. Select a list of combinations of various
attributes.
4. Decide a mode of presentation of
the attributes to the respondents of the study i.e., whether it should be in
written form, or oral form, or a pictorial representation etc.
5. Inform the combinations of the
attributes to the prospective customers.
6. Request the respondents to rank
the combinations, or to rate them on a suitable scale, or to choose between two
different combinations at a time.
7. Decide a procedure to aggregate
the responses from the consumers. Any one of the following procedures may be
adopted:
ii. Put all the responses together and construct a
single utility
iii. Function.
iv. Split the responses into a
certain number of segments such that within each segment, the preferences would
be similar.
Introduction
Everything in the world is undergoing a change. There is a proverb saying that “the old order changes, yielding place to new”. Due to rapid advancement in science and technology, there is fast communication across the world. Consequently, the whole world has shrunk into something like a village and thus now-a-days one speaks of the “global village”. Under the present set-up, one can purchase any product of his choice from whatever part of the world it may be available. Because of this reason, what was a seller’s market a few years back has transformed into a buyer’s market now.
In a seller’s market of yesterday, the manufacturer or the seller could pass on a product according to his own perceptions and prescriptions. In the buyer’s market of today, a buyer decides what he should purchase, what should be the quality of the product, how much to purchase, where to purchase, when to purchase, at what cost to purchase, from whom to purchase, etc. A manager is perplexed at the way a consumer takes a decision on the purchase of a product. In this background, conjoint analysis is an effective tool to understand a buyer’s preferences for a good or service.
Meaning Of Conjoint Analysis
A product or service has several attributes. By an attribute, we mean a characteristic, a property, a feature, a quality, a specification or an aspect. A buyer’s decision to purchase a good or service is based on not just one attribute but a combination of several attributes. i.e., he is concerned with a join of attributes.
Therefore, finding out the consumer’s preferences for individual attributes of a product or service may not yield accurate results for a marketing research problem. In view of this fact, conjoint analysis seeks to find out the consumer’s preferences for a ‘join of attributes’, i.e., a combination of several attributes.
Let us consider an example. Suppose a consumer desires to purchase a wrist watch. He would take into consideration several attributes of a wrist watch, namely the configuration details such as mechanism, size, dial, appearance, colour and other particulars such as strap, price, durability, warranty, after-sales service, etc. If a consumer is asked what the important aspect among the above list is, he would reply that all attributes are important for him and so a manager cannot arrive at a decision on the design of a wrist watch. Conjoint analysis assumes that the buyer will base his decision not on just the individual attributes of the product but rather he would consider various combinations of the attributes, such as
‘mechanism, colour, price, after-sales service’,
or ‘dial, colour, durability, warranty’,
or ‘dial, appearance, price, durability’, etc.
This analysis would enable a manager in his decision making process in the identification of some of the preferred combinations of the features of the product.
The rank correlation method seeks to assess the consumer’s preferences for individual attributes. In contrast, the conjoint analysis seeks to assess the consumer’s preferences for combinations (or groups) of attributes of a product or a service. This method is also called an ‘unfolding technique’ because preferences on groups of attributes unfold from the rankings expressed by the consumers. Another name for this method is ‘multi-attribute compositional model’ because it deals with combinations of attributes.
Steps In The Development Of Conjoint Analysis
The development of conjoint analysis comprises of the following steps:
1. Collect a list of the attributes (features) of a product or a service.
i. Go by the individual responses of the consumers.
8. Choose the appropriate technique
to analyze the data collected from the respondents.
9. Identify the most preferred combination of
attributes.
10. Incorporate
the result in designing a new product, construction of an advertisement copy,
etc.
Tags : Research Methodology - Factor Analysis And Conjoint Analysis
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