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Market segmentation with choice-based conjoint analysis

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Choice-based conjoint analysis has increased in popularity in recent years among marketing practitioners. The typical practice is to estimate choice-based conjoint models at the aggregate level, given insufficient data for individual-level estimation of part-worths. We discuss a method for market segmentation with choice-based conjoint models. This method determines the number of market segments, the size of each market segment, and the values of segment-level conjoint part-worths using commonly collected conjoint choice data. A major advantage of the proposed method is that current (incomplete) data collection approaches for choice-based conjoint analysis can still be used for market segmentation without having to collect additional data. We illustrate the proposed method using commercial conjoint choice data gathered in a new concept test for a major consumer packaged goods company. We also compare the proposed method with ana priori segmentation approach based on individual choice frequencies.

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Desarbo, W.S., Ramaswamy, V. & Cohen, S.H. Market segmentation with choice-based conjoint analysis. Marketing Letters 6, 137–147 (1995).

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Key words

  • Choice experiments
  • conjoint analysis
  • market segmentation