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.

Understanding conjoint analysis

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.

Conjoint analysis survey types

Businesses new to conjoint analyses should know that there are three ways to collect survey data:

  1. 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.
  2. 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.
  3. 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.

Identifying attributes in conjoint analysis

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. 

Conjoint analysis survey best practices

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.

Interpreting conjoint analysis results

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 product innovation by identifying features that need improvement or removal.

Key takeaways

  • 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. 

Other Analysis Frameworks

A failure mode and effects analysis (FMEA) is a structured approach to identifying design failures in a product or process. Developed in the 1950s, the failure mode and effects analysis is one the earliest methodologies of its kind. It enables organizations to anticipate a range of potential failures during the design stage.
Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.
Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.
A paired comparison analysis is used to rate or rank options where evaluation criteria are subjective by nature. The analysis is particularly useful when there is a lack of clear priorities or objective data to base decisions on. A paired comparison analysis evaluates a range of options by comparing them against each other.
The Monte Carlo analysis is a quantitative risk management technique. The Monte Carlo analysis was developed by nuclear scientist Stanislaw Ulam in 1940 as work progressed on the atom bomb. The analysis first considers the impact of certain risks on project management such as time or budgetary constraints. Then, a computerized mathematical output gives businesses a range of possible outcomes and their probability of occurrence.
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.
Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.
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It’s possible to identify the key players that overlap with a company’s business model with a competitor analysis. This overlapping can be analyzed in terms of key customers, technologies, distribution, and financial models. When all those elements are analyzed, it is possible to map all the facets of competition for a tech business model to understand better where a business stands in the marketplace and its possible future developments.
The Pareto Analysis is a statistical analysis used in business decision making that identifies a certain number of input factors that have the greatest impact on income. It is based on the similarly named Pareto Principle, which states that 80% of the effect of something can be attributed to just 20% of the drivers.
A comparable company analysis is a process that enables the identification of similar organizations to be used as a comparison to understand the business and financial performance of the target company. To find comparables you can look at two key profiles: the business and financial profile. From the comparable company analysis it is possible to understand the competitive landscape of the target organization.
SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

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