Analyze Data
Conjoint Example
Many surveys include questions intended to determine how important particular attributes are to people or how much they would be willing to pay for a product or service that has the particular attribute. For example, a hotel may be trying to decide how to spend the budget they have allocated for upgrading. Opinions may differ about what will generate the best return. Some members of the management team may favor redoing the bathrooms in the guest rooms, some may think that updating the furnishings is more important, and others may believe that adding a health club, business center, or other amenities would be better options. Often in a situation like this, a survey would include direct questions about each of these things, but many times responses to questions such as these are not very useful because people rate everything as important or else the survey responses end up being poor predictors of subsequent behavior.
Conjoint is a different approach for dealing with questions like these and tends to produce better results. For conjoint analysis to be used, people need to be presented with a series of scenarios representing complete products or services as part of the data collection process. For example, one scenario might have one price for all of the hotel’s existing attributes plus free use of an on-site health club with a pool and particular fitness equipment, while another might include all of the hotel’s existing attributes plus free use of an on-site business center that offers access to computers, the Internet, and copy machines at a price ten dollars greater than the current rate. Respondents rate or rank these scenarios and those ratings or rankings are then used to infer, using statistical procedures, which attributes are most important and how much extra people would be willing to pay in order to get a desired attribute. In the hotel example, the analysis might show that on average, people would be willing to pay $5.00 more than the current room rate if the rooms had nicer bathrooms, $3.00 if they had nicer furniture, $3.75 if the room rate included access to an on-site health club, and an extra $1.25 per night for free access to a business center on site. This information could then be used in conjunction with the costs of each type of upgrade to decide which is the best use of the hotel’s budget.