Consumers make decisions about products and services based on what they value and how they reconcile the inevitable trade-offs among offerings. Without specific strategies to get at the reasoning behind consumer choices and purchase behavior, important details about these decision-making processes remain hidden. Yet these details are precisely what a business needs to know in order to fine-tune their offerings to maximize market share. Knowing the lynchpins for customer or client decision-making helps to keep the costs for production and / or service provision in balance with customer values.
Conjoint analysis segregates different elements of a product or service in such a way that researchers can measure what is of value to consumers. In addition, conjoint analysis permits researchers to test various combinations of these elements with potential consumers in order to identify the optimal combination.
What the Market Will Bear and Bare
Pricing decisions can be strongly supported by a well-administered conjoint analysis of a product or a service. Customers vary widely in response to prices. They typically do not trust pricing that appears too low and consider it an indicator of inferior quality. Pricing that seems too high tends to trigger a comparison mode in customers, who then focus on weighing all the many attributes of various products or services in order to get the best value for their money. This is clearly a scene that businesses seek to avoid; market research has demonstrated that too many choices confuse consumers to the point that they may avoid making a decision (a purchase) altogether.
Conjoint analysis is a quantitative approach to market research that lays bare otherwise hidden consumer preferences and the thinking behind those preferences. The relative value of product attributes or service characteristics can be represented statistically through conjoint analysis. As a result of a well-executed conjoint analysis, product design or service configurations can be optimized to attract consumers while ensuring that research and development money or manufacturing effort is not directed at features unimportant to consumers. To read more about the benefits of statistical analysis, read my article on Choosing Between Qualitative and Quantitative Research Methods.
How Do I Love Thee? Let Me Count the Ways
Elizabeth Barrett Browning went on to write "I love thee to the depth and breadth and height..." With apologies to the poetess, each of these measurable characteristics could be used in conjoint analysis, the purpose of which would be to discover which attribute is the most valued, presumably by some contemporary figures named Liz and Bob, rather than the beloved Elizabeth and Robert.
Conjoint analysis depends on the ability of researchers to describe specific product or service attributes, or characteristics, and then to further describe levels of those attributes. For example, a company that manufactures snack bars might describe the attributes and levels of their product in this way.
- The attribute is the weight of the bar. The levels are: 1 ounce or 2 ounces
- The attribute is the flavor of the bar. The levels are: chocolate chip or peanut butter.
- The attribute is the texture of the bar. The levels are: chewy or crunchy.
- The attribute is the packaging of the bar. The levels are: 6 to a box or 10 to a box.
Limiting the number of choices available to a participant in a conjoint analysis study helps to produce more usable data. But a sufficient number of choices must be made by the research participant in order to determine the relative utility of the attribute levels and the relative importance of the attributes themselves. Let's take a look at these choices using the snack bar example.
A research participant indicates she prefers a 2 ounce bar because she typically eats two 1 ounce bars at a sitting. The participant prefers the chocolate chip flavor because she believes the peanut butter flavored bars will have more calories. This participant eats her snack bars on the go and believes chewy textured bars do not make a mess the way that crunchy textured bars do. A box of 6 bars will fit in the participant's tote bag, while a box of 10 bars, especially if the bars are 2 ounces each, will be too bulky. We might give this participant a profile name such, Meal-on-the-Go.
But we still don't know which attribute she considers to be the most important. Continuing the study, we learn that this research participant considers the 2 ounce weight of the bar to be the most important of the attributes she has been asked to consider. This choice is consistent with her consumer profile, Meal-on-the-Go.