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Conjoint Analysis And Why It Matters In Business
Conjoint analysis is a market research tool that measures consumers’ value on certain products or services. Market researches can be undertaken perhaps via surveys, which can be rating, ranking, or choice-based.
Consumers make many buying decisions daily, and each decision involves a process of deliberation where multiple attributes affect the outcome. Purchasing a house is a classic example, where consumers must consider attributes ranging from historical interest rates to the quality of local schools. What’s more, different consumers will be sensitive to different attributes. One might view price as the most important consideration, while another may consider a wine cellar to be non-negotiable.
To turn these preferences into quantitative data, conjoint analysis should be performed. This is done in the form of a survey. The survey provides valuable insight into what a consumer wants in a product or service and what they are willing to spend to get it. For example, the consumer wanting to purchase a house might require an ocean view. As a desired attribute, the consumer is willing to pay a higher price to attain it.
Businesses new to conjoint analyses should know that there are three ways to collect survey data:
Rating-based – where participants give each attribute of a product or service a rating according to a predetermined scale. Most commonly, this is a scale of 1-100.
Ranking-based – where each element is ranked from most desirable to least desirable. In a slight variation of the ranking-based survey, participants choose from a list of their most and least favorite elements and exclude the rest.
Choice-based – where participants are presented with combinations of attributes and asked to choose the most relevant to their needs. Choice-based questionnaires are a great way to gauge interest in a theoretical product or service, saving businesses the time and money from having to develop them first.
In identifying attributes, less is more. When consumers are asked to assess more than 5 or 6 simultaneously, they suffer from cognitive overload and the integrity of the results is compromised.
Once attributes have been determined, levels must be assigned to each. For a home-buyer wanting to reduce commute time, the attribute may be split into values of 10, 20, and 30 minutes. Regardless of the product or service undergoing the analysis, levels should provide tiered value to the consumer.
Poor question selection has the potential to render a survey worthless. Here are some best practices to ensure effectiveness:
Set expectations. That is, explain to the consumer what they need to do to answer the survey questions properly. Ensure that questions are clearly worded and unambiguous.
Start with screener questions, such as age, income, job title, or other demographic information. By collecting this data upfront, businesses can determine whether consumers are a good fit for their products and adjust accordingly.
Consider the question structure. Questions should logically follow on from one another and be grouped thematically. Wherever possible, pose situational questions. Instead of simply asking a home-buyer to choose from a list of houses, ask them what it was about their last home purchase that they would have done differently.
Once the data has been collated, there are several ways to analyze it. Many businesses opt to use Microsoft Excel. Others may opt to use software such as Qualtrics which offers survey data collection and analysis in the one package.
In either case, it’s important to analyze data in such a way that useful conclusions can be drawn. This helps guide future marketing decisions and guides productinnovation by identifying features that need improvement or removal.
Conjoint analysis is a survey and statistics-based means of performing market research with a focus on product or service features.
Conjoint analysis survey data can be collected in three different methods based on ratings, rankings, or choice. Each method asks the consumer to score product features (attributes) according to relative desirability.
Conjoint analysis is only as robust as the questions used in the survey. Each question must be clearly worded, relevant, situational, and follow in a logical sequence.
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