Conjoint Analysis

• Confused about which product or service features customers prefer and will actually pay for?
• Are you uncertain how to price for the added value of a product or service?
• Interested in segmenting your market by the value customers place on product and service features?

If so, conjoint analysis (or trade-off analysis) may be able to help.

The Allegheny Marketing Group (AMG) uses conjoint analysis as a marketing research tool to help clients quantify how buyers value product and service features and how much they are willing to pay for the added value.

Conjoint places buyers in real-life buying situations, forcing them to choose between realistic product packages. By asking questions which actually simulate the buying experience, conjoint analysis can reveal the buyer's decision making process and can unravel how the buyer would trade one product attribute for another.

Some of the applications and benefits of conjoint analysis include:

Conjoint Analysis Applications Determine which product and service features are most valued by customers Price to the value of a new product or service Segment markets based on what customers value Determine optimum product features and service levels Identify new product opportunities and direct future product development

Benefits of Conjoint Analysis Measures price sensitivity Predicts impact of new products and services Predicts product "cannibalism" Quantifies the effect of product deletions Identifies how to increase preference share with non-customers Quantifies the effects of competitive reactions Answers virtually any "what-if" scenario

To complete an example of a conjoint analysis questionnaire, CLICK HERE.

The following are actual examples of projects conducted by the Allegheny Marketing Group:

Case Study 1

An innovative medical device company had a strong position in their market, but was experiencing gradual market share erosion and had not launched a new product in years. As they prepared to launch a new series of products, important marketing issues needed to be solved -- would the new products cannibalize their already strong position, should the new product series replace or supplement their current products, how should product options be bundled and priced for value, etc.

Using conjoint analysis as an integral piece of the market research, the strong position of our client's products was confirmed. Two of the new products offered tremendous value to a significant segment of customers and could command a premium price. Two other products were shown to be favored primarily from their current customer base and, as proposed, did not attract current non-customers. By unbundling product features, and pricing them separately, a low-priced, low-feature product line could compete in the price-sensitive market segment, while not cannibalizing their current products. The net effect was a multi-tiered product line, with value pricing, and a very successful new product launch.

Case Study 2

A building products company had a different problem -- more than 2,000 SKUs for ceiling products alone. Managing this huge number of products was an inventory and manufacturing nightmare, not to mention a very costly process. How could the product line be pruned effectively without losing market share?

The large number of product options made traditional market research techniques very difficult and cumbersome. Conjoint analysis was a perfect solution because of its ability to easily simulate thousands of product options in a single study design. Through conjoint analysis, the key product attributes which customers trade-off were identified and products which could be eliminated from the product portfolio were highlighted.