Conjoint analysis is one way to measure consumer preferences. Conjoint surveys measure consumer preferences for product features by presenting respondents with “products” for sale, represented by sets of product features at certain prices. Which of these “products” they choose, aggregated over all respondents, measures the importance of a feature.
Conjoint surveys are especially useful when marketers or advertisers are launching a new campaign and looking for what combination of features are most appealing to their audiences. Similarly, if a class of plaintiffs seeks to assign a dollar amount to a product feature, in order to calculate damages, conjoint surveys measure the importance of that feature and produce a dollar amount, or price premium. Courts increasingly rely on the information provided by conjoint analysis to calculate class-wide damages in consumer class actions.
What is a “price premium” and how does conjoint analysis find it?
When a class of consumers seeks damages for an alleged product defect, both sides need a way to calculate those damages that is directly tied to the alleged defect. To do this, both sides may retain conjoint survey experts and conduct conjoint surveys, to determine a financial value for a product attribute or defect. Most commonly, a choice-based conjoint survey is used to find the “price premium” for an attribute or defect–that is, the price a consumer is willing to pay for a product or service with the attribute, or without the defect. This is how experts arrive at a dollar amount, or “price premium.”
In turn, courts may rely on conjoint analysis to calculate classwide damages. Courts may be more likely to accept this type of evidence when the conjoint survey is supported by the testimony of economic experts, who can add opinions on how supply issues affect price to to the survey’s estimate of consumer demand. In theory, conjoint analysis presents an excellent solution to finding a price for a defect–but in practice, conjoint surveys can be excluded if they are not designed properly.
The Honda Odyssey
For example, a court excluded a conjoint expert’s survey in a class-action case involving an automotive defect. In MacDougall v. Am. Honda Motor Co., 2020 WL 5583534 (C.D. Cal. 2020), a class of plaintiffs sued Honda Motor Co, alleging that Honda failed to disclose a transmission defect in its Odyssey minivan. The plaintiffs’ damages request relied in part on evidence provided by a conjoint survey. In opposing admission of that evidence, Honda argued that the analysis failed to take into account the supply side of the market, therefore failing to account fully for market considerations. The district court agreed, ruling that the plaintiffs’ damages calculation was inflated because it did not take into account supply-side influences on prices, only consumer willingness to pay.
However, the Ninth Circuit reversed, finding that the quality of the survey should affect the weight of the survey evidence, not whether it was admissible. It also ruled that conjoint analysis should not be categorically excluded as evidence in class-action cases, was an appropriate measure for damages, because the admissibility of expert testimony should be considered on a case-by-case basis. MacDougall v. Am. Honda Motor Co., No. 20-56060 (9th Cir. 2021)
Is Conjoint Analysis the Future of Class Wide Damages Calculations?
While courts found the methodology and execution of the conjoint survey in McDougall problematic, the Ninth Circuit preserved the admissibility of conjoint evidence generally. A key takeaway from the decision is that a conjoint survey, in combination with the testimony of an expert on supply-side economics, is still an acceptable form of evidence to calculate damages. Designing and conducting reliable conjoint surveys requires adherence to other best practices, including conducting pretests to properly assign attributes, defining an accurate survey universe, and using standard methodology. MMR Strategy Group offers expertise in conjoint surveys for litigation and rebuttals. Contact MMR if you are considering introducing conjoint analysis as evidence in a class action litigation.