Conjoint analysis was used to determine how consumers make trade-offs between various attributes when selecting microcomputers. Four attributes were chosen as salient. These attributes and their levels are
• 4 Years
Monitor Maximum Resolution
• 1280 X 1024
• 1680 X 1050
• 17 inch
• 24 inch
All possible combinations of these attribute levels result in 24 (2 X 2 X 2 X 3) profiles of microcomputers. One such profile is as follows
Extended Warranty: 4 Years
Monitor Max. Resolution:1680 X 1050
Screen size:17 inches
Price level: $1,500
Respondents rank-ordered these profiles in terms of preferences. The data for each respondent can be utilized to develop preference functions. The preference functions for one individual are illustrated.
Assumptions and Limitations of Conjoint Analysis
Although conjoint analysis is a popular technique, like MDS. it involves a number of assumptions and limitations. Conjoint analysis assumes that the important attributes of a product can be identified. Furthermore, it assumes that consumers evaluate the choice alternatives in tenns of these attributes and make trade-offs. However, in situations where image or brand name is important, consumers may not evaluate the brands or alternatives in terms of attributes. Even if consumers consider product attributes, the trade-off model may not be a good representation of the choice process. Another limitation is that data collection may be complex, particularly if a large number of attributes are involved and the model must be estimated at the individual level. This problem has been mitigated to some extent by procedures such as interactive or adaptive conjoint analysis and hybrid conjoint analysis. It should also be noted that the part-worth functions are not unique
Hybrid Conjoint Analysis
Hybrid conjoint analysis is an attempt to simplify the burdensome data-collection task required in traditional conjoint analysis. In the traditional method, each respondent evaluates a large number of profiles, yet usually only simple part-worths, without any interaction effects, are estimated. In the simple part-worths or main effects model, the value of a combination is simply the sum of the separate main effects (simple part-worths), In actual practice, two attributes may interact, in the sense that the respondent may value the combination more than the average contribution of the separate
parts. Hybrid models have been developed to serve two main purposes: (I) simplify the data collection task by imposing less of a burden on each respondent, and (2) permit the estimation of selected interactions (at the subgroup level) as well as all main (or simple) effects at the individual level.
In the hybrid approach, the respondents evaluate a limited number, generally no more than nine, of conjoint stimuli, such as full profiles. These profiles are drawn from a large master design, and different respondents evaluate different sets of profiles, so that over a group of respondents, all the profiles of interest are evaluated. In addition, respondents directly evaluate the relative importance of each attribute and desirability of the levels of each attribute. By combining
the direct evaluations with those derived from the evaluations of the conjoint stimuli, it is possible to estimate a model at the aggregate level and still retain some individual differences.
Weeding Out the Competition
In 2008, be came part of Akzo Nobel the world sbiggest coatings manufacturer. the number one in decorative paints and performance coatings. and a leading supplier of specialty chemicals. leI Americas Agricultural Products did not know whether it should lower the price of Fusilade, its herbicide. It knew it had developed a potent herbicide, but it was not sure the weed killer would survive in a price-conscious market. So a survey was designed to assess the relative importance of different attributes in selecting herbicides and measure and map perceptions of major herbicides on the same attributes. Personal interviews were conducted with 601 soybean and cotton farmers who had at least 200 acres dedicated to growing these crops and who had used herbicides during the past growing season. First. conjoint analysis was used to determine the relative importance of attributes farmers use when selecting herbicides.
Then multidimensional scaling was used to map farmers’ perceptions of herbicides. The conjoint study showed that price greatly influenced herbicide selections, and respondents were particularly sensitive when costs were more than $18 an acre. But price was not the only determinant. Farmers also considered how much weed control the herbicide provided. They were willing to pay higher prices to keep the pests qff their land.
The study showed that herbicides that failed to control even one of the four most common weeds would have to be very inexpensive to attain a reasonable market share. promised good weed control.
Furthermore, multidimensional scaling medicated that one of Fusilade’s competitors was considered to be expensive, Hence. kept its original pricing plan and did not lower the price of Fusillade
As of 2009, however, the agriculture industry has changed. One factor that has changed the industry is a shift in technology, especially biotechnology. Roundup Ready soybeans had a huge effect on the herbicide market by making farmers switch from using traditional soybean herbicides to a new combined technology of Roundup and transgenic seed.
The new technology cut the cost of per-acre herbicides in half and, as a result, competing chemical companies were forced to meet the price of the new technology. It is very important for companies to research consumer acceptance of technological innovations using techniques such as MDS and conjoint analysis to avoid being left by the wayside
Herit-Age or Merit Age in Europe
European car manufacturers are increasingly focusing on an attribute that competitors will not be able to buy or build-it is heritage. For BMW, it is superior engineering. A. B. Volvo of Sweden has a reputation for safe cars. Italian Alfa Romeo rides on the laurels of engines that have won numerous races. The French Renault has savoir-faire. On the other hand, Japanese cars are advanced technologically but they do not have class or heritage. For example, Lexus and Infiniti are high-performance cars, but they lack class.
Philip Gamba, VP-marketing at Renault, believes Japanese brands lack the “French touch” of that autornaker’s design and credibility. These days, Renault is building a car with a focus on comfort. BMW is trying to emphasize not the prestige of owning a luxury automobile but the “inner value” of its cars. Communicating value in cars is of growing importance. BMW has the edge of German heritage
Because performance and heritage are important attributes or dimensions in automobile preferences of Europeans, the positioning o( different European cars on these two dimensions is shown. Note that BMW has attained the best positioning on h< ,.h these dimensions. Typical of most American and Japanese cars in the 2000s has been the emphasis on quality reliability, and efficiency. However, to compete with European cars in the twenty-first century, Americans and the Japanese are faced with the challenge of an added dimension-heritage. This calls for new marketing strategies by American and Japanese automakers. For example. GM announced m 2w~ .hat every one in America would get the employee discount. Under this scheme, customers paid what GM employees paid, not a cent more. This scheme helped GM to compete more effectively with European and Japanese brand