3 Ways to Use Conjoint Analysis in Market Research
The term ‘conjoint’ is described simply as “pertaining to or formed by two or more in combination.” This, in my opinion, is a very good summary of what conjoint analysis is and what it is most useful for.
When it comes to conjoint I always think about a mobile phone contract. It is a product composed of several elements: you choose a handset, monthly text allowance, minutes and data allowance. You can also add any additional services such as mobile phone insurance, international calls, etc. Researching these types of products is what conjoint analysis is to me.
For anyone who is new to conjoint and would like to know more, Sray Agarwal offers a very good overview of what conjoint analysis is and how to use it. In his article, Sray takes you through a worked example that illustrates the concept. In addition to this, Scott Neuner provides a great summary of the different types of conjoint analysis and what they involve.
So what is conjoint most useful for? If you search the internet for applications of conjoint analysis, you will find several different uses of it. This is not surprising as though the technique is a complex one, its complexity gives it several powerful applications for any customer-focused business.
The three applications which stand out most to me are:
1. Understanding Decision Making
One of the uses of conjoint analysis is being able to understand how customers make their decisions. It allows you to answer questions such as: When a customer is presented with products composed of several features, how do they prioritise? Which features do they see as the ‘must haves’ and which as the ‘nice to haves’? Are there features they are willing to sacrifice? Which feature drives purchase and is linked to the price of the product. Conjoint analysis will give you detail on all of these questions.
Returning to my example of a mobile phone contract. To use the conjoint technique here, you could prepare several versions of the contract offer where you vary the elements it’s composed of. For example you change the handset that is offered or the data allowance, or number of available minutes, etc. You then ask participants to choose between these different variations which then gives you a basis of your analysis of what drives customer choice.
If you are interested in this use of the conjoint, Santa Rimsevica explains how to use this technique to understand customer preferences through advanced analytics.
2. Developing New Products & Services
Product development is an important part of maintaining a competitive advantage and expanding any business. Any specific product features can become a unique and effective differentiator. Conjoint is a good way for the research and development team to test the potential success of the product before they commit a significant proportion of their budget, time and effort todeveloping it.
Understanding the value of any newly developed features can also help determine its value to the organisation and help decide whether or not the feature is worth protecting with a patent (to make it harder for competitors to mirror that development). Conjoint analysis is useful here as this technique focuses on determining customer response to the different product elements, therefore allowing you to estimate the value of any specific product feature.
3. Setting Objectives
Another advantage of conjoint analysis is modelling the data using statistical and mathematical techniques. A company can benefit greatly from this, as conjoint modelling allows you to forecast and estimate both demand and likely revenue from product or market share. This is great way to plan and prepare organisational targets as well as evaluating the success of the action the organisation is looking to take.
We are all familiar with the concept of SMART objectives, where A stands for achievable. Conjoint analysis helps determine just that. It can show what is realistic and can be used to set the target that is stretching yet possible to achieve.
This is by no means an exhaustive list of potential applications of conjoint analysis. For more applications have a look through Vithala R. Rao’s book 'Applied Conjoint Analysis'.
Conjoint analysis does have a warning label attached to it though. It’s a powerful tool and can provide you with detailed insight into complex consumer behaviours, but it’s important to remember that conjoint has its limitations. Liz White explains the three main pitfalls of this technique:
Rushing the design – what you put in to the analysis will affect the quality of what you get out of it; there is a benefit to taking your time, collaborating and referring back to what you want to achieve.
Overusing prohibitions in your analysis design – too much of a good thing is not always advantageous. White explains, that whilst prohibitions allow you to more accurately reflect conditions in the market, too many of them will impact the precision of the analysis
Not taking advantage of the simulation – one of the advantages of conjoint analysis is being able to create a model which can predict the reaction to almost any combination of features tested. It offers a great benefit, so sharing access to the simulation may help stakeholders and other end users see the value for money in conjoint.
What are your experiences of conjoint? Share your thoughts, stories and ideas with us below.
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