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Conjoint Analysis in Marketing Research

Fundamentals – Methods – Applications – Critical Assessment

Seminar Paper 2011 26 Pages

Communications - Public Relations, Advertising, Marketing, Social Media

Excerpt

Contents

1 Introduction

2 Fundamentals
2.1 Fundamentals of Marketing Research
2.1.1 Market and Marketing Research
2.1.2 Product and Customer Value System
2.2 Fundamentals of Marketing Research Techniques
2.2.1 Preference Measurement Techniques
2.2.2 Conjoint Analysis

3 Conjoint Analysis
3.1 Role of Conjoint Analysis in Marketing Research
3.2 A Conjoint Analysis Survey
3.2.1 Stage 1 - Problem Definition and Attribute List
3.2.2 Stage 2 - Development of a Survey Design Plan
3.2.3 Stage 3 - Execution of the Survey
3.2.4 Stage 4 - Information Analysis
3.2.5 Stage 5 - Presentation of Findings
3.3 Application of Conjoint Analysis for Marketing Strategies

4 Discussion
4.1 Strengths of Conjoint Analysis
4.2 Criticisms on Conjoint Analysis

5 Summary and Prospects
List of Figures
Bibliography

A Marketing Preference Measurement Techniques

B Conjoint Analysis Self-Survey

Chapter 1 Introduction

"Conjoint analysis has become one of today’s most widely used marketing research tools.

It goes beyond simple surveys, providing a more realistic approach to understanding customers attitudes, opinions, and behaviors."

(Orme, 2010, p. 7)

The author Orme (2010, p. 7) emphasises in his book the growing popularity of conjoint analysis in marketing research. According to Orme (2010, p. 1) the consumer preferences are changing constantly with an increasing speed. Therefore many marketing managers ask themselves, how they could asses client preferences? Which product characteristics are most important to the customer and what price brings the maximum profit? From Wilcox’s (2003, p. 1) point of view conjoint analysis gives answers to these most critical questions of marketing research. The conjoint analysis is a marketing research technique designed to help managers determine the value system of clients and potential customers (Wilcox, 2003, p. 1). Introduced as a fundamental measurement method by the mathematical psychologists Luce and Tukey (1964, p. 1) more than forty years ago, conjoint analysis presents combination of features in product profiles and ask people to rank or make choice among of them. Finally, the results can be used for new product design, targeting, pricing and market segmentation (Dolan, 1990, p. 1). However, there arises the question what is conjoint analysis really and why it has become so popular in contrast to other marketing research techniques?

In order to answer these questions, section 2.1 defines the terms marketing and market research and outlines the contrast between them. Section 2.2 gives an overview of different preference measurement techniques before it deals with the conjoint analysis itself. Chapter 3 presents the main chapter of this assignment. At first, it gives a brief overview of the role of conjoint analysis in the marketing concept. The next two sections illustrate an exemplary conjoint analysis survey and show the usage of conjoint analysis for the design of marketing strategies. Moreover chapter 4 discusses the advantages and disadvantages of conjoint analysis. Finally chapter 5 summarizes the basic insights and gives a short perspective.

Chapter 2 Fundamentals

2.1 Fundamentals of Marketing Research

2.1.1 Market and Marketing Research

Marketing Research

In reference to McDaniel & Gates (1998, p. 5) marketing research can be defined as the following:

"Marketing research is the planning for, collection and analysis of data relevant to marketing decision making and the communication of the results of this analysis to management." (McDaniel & Gates, 1998, p. 5)

On the whole, marketing research has to fulfill three functional roles:

- Descriptive function: Gathering and presentation of statements of facts like his- toric sales trends.
- Diagnostic function: Explanation of data or actions like the impact on sales after a design change of a product.
- Predictive function: Specification of how to use the descriptive and diagnostic research in order to predict the results of a planned marketing decision.

Market Research

Market research is related to Burmann et al. (2007, p. 94) the systematic research of sales and procurement markets of a company.

Market versus Marketing Research

Regarding Koch (2004, p. 12) marketing research and market research will often be seen as the same thing or are at least closely related. But the major activities of marketing and market research are totally different (Figure 2.1):

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Figure 2.1: Market versus marketing research (Koch, 2004, p. 12, adjusted diagram)

Market research deals with the gathering of external information of sales and procurement markets. In contrast to that, marketing research concentrates on the providing of internal and external information about the sales market (Koch, 2004, p. 12).

2.1.2 Product and Customer Value System

In the context of marketing research the terms product and customer value system play a significant role . Therefore, they will be defined as follows (Figure 2.2):

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Figure 2.2: Product and customer value system (own diagram)

- Product: A product is a collection of attributes (Dolan, 1990, p. 2).
- Customer Value System: The customer value system specifies how much value a consumer puts on each level of each attribute of a product (Dolan, 1990, p. 2).

2.2 Fundamentals of Marketing Research Techniques

2.2.1 Preference Measurement Techniques

According to MacInerney (2007, p. 6) manager needs predictive methods for identifying customers preferences in order to take the right marketing strategy. Therefore, the following section gives an overview of preference measurement techniques, which can be divided in three groups (Figure 2.3):

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Figure 2.3: Overview of preference measurement techniques (own diagram)

- Compositional Approach: This method determines the customer preference of every attribute of a product separately (Figure A.1). Afterwards, an overall assess- ment of the whole product will be created. An example for this is approach is the best-worst scaling (Schubert, 1991, S. 127).
- Decompositional Approach: The decompositional approach measures at first the full preference of a product during a selection of different product alternatives (MacInerney, 2007, p. 6). The customer preference of every single attribute will be calculated afterwards. An example for this method is the conjoint analysis, which will be introduced in the following section.
- Hybrid Approach: The hybrid method is a mixture of compositional and decom- positional approach. The adaptive conjoint analysis is an instance for this method (Orme, 2010, p. 117).

2.2.2 Conjoint Analysis

The term conjoint derives from the verb to conjoin, which means joined together (Orme, 2010, p. 29). The conjoint analysis was first coined by the mathematical psychologists Luce and Tukey (1964, pp. 1-27) and applied for marketing research by Green and Rao in the early 1970s (Green & Rao, 1971, pp. 355-363). The conjoint analysis is a collection of similar approaches, which can be defined as the following:

"Conjoint Analysis is any decompositional method that estimates the structure of con- sumer’s preferences...given his/her overall evaluations of a set of alternatives that are prespecified in terms of levels of different attributes." (Green & Srinivasan, 1978, p. 104)

An overview of various conjoint analysis is shown in figure A.2. On the whole, all conjoint analysis methods have the following characteristics in common:

- Decompositional Approach: The conjoint analysis s a decompositional approach, which questionnaires ask respondents to make trade-offs of product profiles similar to the real market (Figure 2.4).
- Company’s goal: The company’s goal of conjoint analysis is the ability to predict customer preferences in order to perform better than the company’s competitors (Orme, 2007, p. 19).
- Element of Art: The art of conjoint analysis is the selection of the right features.
- Elements of Science: The science of conjoint analysis is the calculation and the simulation of different competitive trade-off scenarios.

illustration not visible in this excerpt

Figure 2.4: Feature versus conjoint questions (Orme, 2009, pp. 20-21)

Chapter 3 Conjoint Analysis

3.1 Role of Conjoint Analysis in Marketing Research

In order to understand the role of conjoint analysis in marketing research, the method has to be arranged in the areas of customer buying process and marketing decisions (Figure 3.1):

illustration not visible in this excerpt

Figure 3.1: Role of conjoint analysis in marketing research (Burmann et al., 2007, p. 92, adjusted diagram)

- Customer Buying Decisions: The five-stage model represents the ideal buying decision process of a customer for high-involvement products from problem recogni- tion until the post purchase behavior (Kotler & Keller, 2005, p. 191).
- Marketing Decisions: The marketing decisions cover the field of responsibility of marketing management. The area contains the definition of a common marketing vision and goals, deriving marketing strategies and choosing marketing instruments.
- Marketing Research: The marketing research considers all internal and external elements of the sales market. The results of the marketing research are the basis for the selection and verification of marketing decisions (Figure 3.1).

In this context, the conjoint analysis as a marketing research method helps to answer questions like: Which product characteristics are most important to the customer? And what is the best product design and the optimal price? In order to answer these questions, the next two sections describe how a concrete conjoint analysis survey works and illustrate its usage for marketing strategies.

3.2 A Conjoint Analysis Survey

This section gives an insight, how a classic conjoint analysis by Green and Rao (1971) works. The method will be illustrated with an exemplary credit card survey.

3.2.1 Stage 1 - Problem Definition and Attribute List

Imagine that a credit card company would like to optimize their product portfolio. They are interested in how consumers trade off several credit card offerings. A market researcher approach the problem with a conjoint analysis. First, a list of attributes and levels is developed that capture the range of brands, interest rates and credit limits (Figure 3.2):

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Figure 3.2: Attributes and levels of a credit card (Orme, 2010, p. 7)

3.2.2 Stage 2 - Development of a Survey Design Plan

Instead of evaluating all (3 x 3 x 3) 27 combinations, a subset of possible product profiles is created in a design plan. The following diagram shows a balanced design plan in which each level of an attribute appears exactly once with every other level from other attributes. The results are nine credit card offers, which are marked by the x (Figure 3.3):

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Figure 3.3: Conjoint analysis design plan (Orme, 2010, p. 9)

3.2.3 Stage 3 - Execution of the Survey

The next stage represents the execution of the survey. In this credit card survey, a consumer has to score each of nine credit card offers with a ten-point scale. 0 means not at all and 10 means like very much. The consumer has to make trade-offs similar to the real market. For instance, a possible result could look like follows (left Figure 3.4):

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Figure 3.4: Credit card survey and attribute level scores (Orme, 2010, pp. 9-12)

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Details

Pages
26
Year
2011
ISBN (eBook)
9783640831050
ISBN (Book)
9783640830749
File size
2.8 MB
Language
English
Catalog Number
v166538
Institution / College
AKAD University of Applied Sciences Stuttgart
Grade
1,3
Tags
Marketing Marketing Research Conjoint Conjoint Analysis Marketing Strategy Marktforschung Conjoint-Analyse Marketing-Mix

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Title: Conjoint Analysis in Marketing Research