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Conjoint analysis is an advanced market research analysis method that attempts to understand consumer expectations on various attributes of products and services and how they correlate to pricing. It is typically used by businesses to get consumer feedback on features of a new product line and what price they are potentially open to paying for that product based on the feature set presented to them.
Let's get a bit geeky and dive deeper. We know from neuroscience that people (people like you and me) cannot put numeric values to "feelings". For instance, how important it is for you to fly on your preferred airline? You could probably say "very important" , "somewhat important" or "not important" and so on.
But when it comes to business, organizations and brands need numeric values for measuring such sentiments and opinions in order to correctly make business projections through real analysis. This is where Conjoint Analysis is critically important - it is used when a organization/brand wants to know how important different elements of a consumer/client decisions are.
Let's assume a scenario, where a product marketer needs to measure the impact of individual features on the estimated market share or sales revenue.
Consider an organization producing tablets, perhaps a competitor to the Apple iPad and Samsung Galaxy. The organization needs to understand how different customers value Attributes such as Size, Brand, Price, and Battery Length. Armed with this information they can create their product range and offering.
Conjoint Analysis seeks to assign values to these product Attributes and Levels by creating realistic choices and asking people to evaluate them. Math is then used to calculate what the underlying values are.
Conjoint Analysis enables businesses to mathematically analyse consumer or client behavior and make decisions based on real insights from data! This allows them to better cater to consumer needs and develop business strategies that provide a competitive edge. This is because fulfilment of customer wishes in a profitable way requires companies to fully understand which aspects of their product and service are most valued by the customer.
Conjoint analysis is considered to be the best survey method for achieving this purpose. It consists of creating, distributing and analyzing surveys among customers with the purpose of modelling their purchasing decision based on response analysis.
QuestionPro can automatically compute and analyze mathematical values to explain consumer behavior - how much value is placed on price, features, geographic location etc, and then correlate this data to consumer profiles. A software-driven regression analysis of data obtained from real customers makes for an accurate analysis, instead of hypothesis.
In the case of Choice-Based Conjoint Analysis (currently the most popular form of Conjoint Analysis) participants are shown a series of options and asked to select the one they would be most likely to buy.
Choice-Based Conjoint asks people to pick the option they would be most likely to buy, other forms of Conjoint Analysis ask people to rank or rate options. Choices are widely considered to be more realistic than asking people to rank options or to rate them.
Each participant is shown several of these choices and the answers they give allow us to work out the underlying values. For example, we can work out what their preferred size is, and how much they would pay for their preferred brand. Once we have the values for each of the Attributes (e.g. brand, size, battery length etc) and for each of the Levels of each Attribute (e.g. Apple iPad, Google Galaxy, Sony Xperia & Nexus) there is a range of analytic options. The key tools for analysis include: What-if modelling, forecasting, segmentation, and applying cost-benefit analyses.
Not all research problems can be tackled with Conjoint Analysis. Conjoint works best when the value of a product can be approximated by the sum of its parts, such as mobile phones, cars, computers, ski holidays, and financial product. Conjoint works less well with emotional variables or interacting combinations, such as advertising messages or food combinations.
To conduct a Conjoint Analysis project you need: access to suitable software (to design and analyse the questions), and a design that meets the rules for conjoint analysis (e.g. covering the important Attributes, proper rotation of the question elements, and avoiding interactions).
Conjoint Analysis requires more preparation than most forms of quantitative market research and the analysis takes longer – which tends to make the whole project slower and more expensive than a simple quantitative test. Conjoint Analysis is used when simpler/cheaper options are unlikely to provide a useful outcome.
The QuestionPro Conjoint Analysis offering includes the following tools: