By Linda Kuster / Guest Column
It seems like everyone is involved in innovation these days. What most people discover, however, is that it takes more than just a good idea 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 needs to testing prototypes or concepts in focus groups to modeling pricing structures that deliver the most attractive combination of profitability and market share.
This month, I’d like to introduce you to 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.
A conjoint primer
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 influences their purchase decision, but by having many participants evaluate multiple groups of bundles, we can determine the importance and value of individual bundle components, as well as the ideal bundle and price point. Conjoint studies can also serve as a measurement of brand equity.
Here are some examples of conjoint studies we have conducted for clients across multiple industries 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, and the best price point for profit and sales.
- An insurance company was developing two new health plans – it gained data on premium tolerance, along with consumer preferences for co-pays, deductibles and other plan features.
- A community college wanted to boost millennial enrollment in its adult education programs – it tested different programming options, including days of the week, class times, course duration, enrollment promotions and tuition.
- A national retailer wasn’t sure if its marketing was still effective with current consumers – conjoint studies investigated how women shopped for back-to-school, fashion refresh and holiday gift-buying. The results allowed the brand to reposition itself with a national media campaign.
- 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 slight market share, so the company abandoned the idea and avoided a potentially large loss.
With a conjoint study, you can gather feedback on products or services that currently exist in the market and those that do not. One museum client discovered that patrons’ preferred day for visiting was the one day of the week it was always closed.
The next time you have questions around product development, entering new markets or the factors impacting your buyers’ selection process, consider a conjoint study. It could provide the answers you need to make innovation decisions with confidence.
Linda Kuster is director of research strategy at Vernon Research Group, based in CedarRapids. Contact her at (319) 364-7278, ext. 7104 or firstname.lastname@example.org.