When unveiling a new product or service, it is critical to know what your customers will value most about it. With products and services having so many various features these days, it can often be difficult to know which aspects your customers place the greatest importance. To help get a better grasp, many business leaders conduct a conjoint analysis.
Conjoint analysis is a statistical marketing research technique that helps businesses measure what their consumers value most about their products and services. For example, a TV manufacturer would want to know if their customers value picture or sound quality more? Or, do they value price more than picture quality. Conjoint analysis helps to put a value on each feature to help businesses tailor their products and services to exactly what the majority of consumers are looking for.
In an article for the website Pragmatic Marketing, Brent Jarvis, the former Global Director of Product Management for Oracle’s Advanced Customer Services business, said conjoint analysis, at its essence, is about features and trade offs.
"Conjoint analysis is a set of market research techniques that measures the value the market places on each feature of your product and predicts the value of any combination of features," Jarvis wrote.
With conjoint analysis, Jarvis said businesses ask questions of their consumers that forces them to make trade-offs among features to determine what goes through their heads when making decisions about which products to buy. It also allows companies to simulate how the market reacts to various feature trade-offs they are considering.
According to the marketing research and analytics firm the Optimization Group, conjoint analysis is based on the principle that the relative values of a product or services features can be better measured when considered jointly than when considered in isolation.
"In business, it’s important to understand how markets value different elements of your products and services," Optimization group writes on its website. "Identifying these elements of higher value will enable you to optimize product development and adjust your pricing structure around the customers' willingness to pay for specific elements."
In addition to determining what feature consumers value most about the product or service they are being asked about, the best conjoint analysis also help businesses predict consumer preference on other items they currently offer or plan to release in the future.
"One of the most important strengths of Conjoint Analysis is the ability to develop market simulation models that can predict consumer behavior to product changes," Survey Analytics writes on its website. "With Conjoint Analysis, changes in markets or products can be incorporated into the simulation, to predict how consumers would react to changes. "
Conducting conjoint analysis
When conducting a conjoint analysis, there are several key steps to be taken. First, businesses must determine the features they want to examine and figure out which customers will be surveyed and how, such as by mail, telephone or online.
The business then places a value or ranking on each possible feature. The selected consumers are then surveyed on which combination of features they like best. In the survey, they are given various combinations among all of the possibilities and asked to rank each combination based on their preference. Once the surveys are returned, businesses then analyze the survey results to determine which feature set is most optimal for their needs.
To help businesses set up and properly evaluate conjoint analysis data, they can employ a number of services and software. The software can help write survey questions, set up feature combinations and run statistical analysis on the data so businesses can best understand the results.
Among some of the more popular options for conjoint analysis software are those offered by Sawtooth Software, Survey Analytics, Qualtrics and XLSTAT.
Conjoint analysis examples
Conjoint analysis can be used in a variety of ways. To help better understand how it can be a useful tool to businesses, it is best to study some practical examples. A simple example by the Optimization Group is on how consumers choose a restaurant to go to for dinner. Among the features they study are the distance to the restaurant, the relative cost of the restaurant and its atmosphere.
According to the Optimization Group, diners make their decision by subconsciously weighing the different elements and choosing the restaurant that best meets their needs. In this example, the first restaurant may be close to the diner and cheap in cost, but has a sub-par atmosphere, while the second restaurant may be farther away and more expensive, but has an excellent atmosphere.
"If you chose restaurant #2, the atmosphere element obviously carried more weight in your eyes than the other two elements," the Optimization Group writes. For restaurants, knowing this information is critical when determining how to design their restaurant, what prices to charge and where ideal places are to be located.
A number of other examples can be found online at: