Presently, it seems like everyone is involved in innovation. What most people discover is that more than just a good idea is needed to realize success. Innovation must be grounded in human needs, competitive in the current market, and profitable. Market research can help in all of these areas, from identifying unmet user needs, to testing prototypes or concepts in focus groups, to modeling pricing structures that deliver the most attractive combination of profitability and market share.
In this post, I will briefly explain one of the most proven and powerful tools for making decisions prior to final commercialization: conjoint analysis. It identifies the ideal bundle of product or service features, as well as the pricing sweet spot. It also allows trained analysts to run market simulations, so you can actually forecast outcomes once you enter the market.
History of conjoint
Conjoint analysis has its roots in statistics and econometrics of the 1960s. In 1985, both IBM and Sawtooth Software introduced conjoint analysis software, and by the 1990s, it was being widely used in a range of industries. The term “conjoint” refers to research participants considering “conjoined” features. In a survey, they are presented with bundles of features for a product or service, typically including a brand and a price. Participants are asked which bundle among a group of bundles is most appealing. People are not accurate in assessing how much any one factor actually influences their purchase decision, but by having many participants evaluate multiple groups of bundles, we can determine the importance and value of the individual bundle components, as well as the ideal bundle and ideal price point. In addition, conjoint studies can serve as a measurement of brand equity.
Applications for conjoint
Conjoint analysis can be helpful in a wide range of industries and for many types of research goals. Here are a few examples of conjoint studies we conducted for clients and what they learned:
- A real-estate developer was planning new condominiums – he learned which potential location to build at, how many bedrooms and bathrooms to include, preferred square footage, the most appealing building amenities, and the best price point for profit and sales
- An insurance company was developing two new health plans – it gained data on maximum premium tolerance along with consumer preferences for co-pays, deductibles, and other individual and family plan features
- A community college wanted to boost millennial enrollment in adult education programs – it tested different programming options, including days of the week, class times, course duration, enrollment promotions, and tuition, and, as a result, implemented major changes that are raising enrollments
- A national retailer wasn’t sure if its marketing was still effective with current consumers – several conjoint studies investigated how women shopped for back-to-school, fashion refresh, and holiday gift-buying, and the results allowed the brand to successfully reposition itself with a national media campaign
- An international manufacturer acquired a competitive company and wanted to determine which brand name(s) to retain post-merger – it learned that one of the brands had much greater brand equity in the market, and so the eventual decision was based on facts, not company politics
Conjoint can identify opportunities and prevent losses
With a conjoint study, you can gather feedback on products or services that currently exist in the market and those that do not. For example, we had a museum client discover that patrons’ most preferred day for visiting was the one day of the week it was always closed!
In an example from the industrial realm, a manufacturer of laboratory equipment was considering retooling one of its products and entering a new market niche. Its conjoint study revealed that this effort – requiring millions in investment – would, at best, return a very slight market share, so the company abandoned the idea and potentially avoided a large loss.
A conjoint study can also identify if the new product or service you have been innovating is going to bring in incremental revenue or simply cannibalize from the sales you have now.
Next time you have questions around product development, entering new markets, or the factors impacting your buyers’ selection process, consider that a conjoint study might provide the answers you need to make innovation decisions with confidence.
Contact Linda Kuster, President, to learn more about how conjoint analysis might help your organization: email@example.com or 319-364-7278, ext. 7104.