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Conjoint analysis in market research for pricing

conjoint analysis

also known as ',', 'choice-based conjoint analysis' or CBC) is a marketing research technique used to determine the preferences of consumers among different options. Often these are new product concepts, but they may also be modifications to existing products, packaging changes, or enhancements to the sales process (e.g., more convenient store locations).

In a typical CBC study, respondents are presented with a number of product profiles and asked to rate them according to which they prefer, which they would purchase first, etc.

CBC is part of a larger family of psychometric techniques known as "stated preference methods" because the data collected relates directly to stated choices made by consumers. This family includes choice-based conjoint analysis, discrete choice models (including conditional logistic regression and mixed logit), and utility theory with external preference relations or indifference modeling.


CBC is often used to estimate utilities for a set of products that can then be incorporated into a more complex choice model. The main strengths of CBC are that it provides accurate estimates of relative utilities and is relatively easy to use. It can be used with relatively small sample sizes and the analysis is conducted in a way that is transparent to the respondent.

There are two main types of CBC:


1. Static CBC: In static CBC, the profiles are presented to respondents all at once in a fixed order. This approach is used when the researcher knows which profiles will be most appealing to respondents.

2. Randomized CBC: In randomized CBC, the profiles are randomly presented to respondents in a different order for each respondent. This approach is used when the researcher does not know which profiles will be most appealing to respondents.

There are two main applications of CBC:

1. Preference assessment: In preference assessment, the aim is to understand the preferences of respondents for a given set of profiles. This information can be used to make decisions about product concepts, modifications, and enhancements.


2. Ranking: In ranking, the aim is to determine the relative order of preference among a set of products. This information can be used to prioritize product concepts, modifications, and enhancements.

There are a number of different software packages available for conducting CBC analyses, including Sawtooth Software's Conjoint and Adaptive Conjoint Analysis (ACA), Megaputer's Polyanalyzer, and StatModel's CAB.

CBC is a powerful tool for understanding the preferences of consumers. It is relatively easy to use and can be applied in a number of different ways. Researchers using CBC should be aware of its strengths and limitations so that they can make the most effective use of it.

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