Conjoint Analysis and Market Modeling
Conjoint analysis is a term that is loosely used to describe a number of different market research techniques, all of which are designed to estimate the value people place on the attributes that define a particular product or service. Attributes can be features (such as performance, warranty, price, etc.), or benefits. Some of the variations of conjoint analysis include full profile conjoint, discrete choice conjoint, choice modeling, and adaptive conjoint. Each of these techniques has its own strengths and weaknesses depending on the type of product or service being studied. TechWise has developed its own approach to conjoint studies, called TechWise Market Model, which combines the benefits of several of these techniques.
At their core, all conjoint analyses involve trade-offs that replicate the real-world purchase process. By asking questions that simulate the buying experience, conjoint analysis can provide valuable insights into the buyer's decision making process including how the buyer would trade one product attribute (i.e., higher performance) for another (i.e., lower price). Decades of research has proven the accuracy and validity of conjoint analysis.
A well designed conjoint study has many potential benefits including the ability to:
- Predict the impact of new products and services on preference share.
- Predict and quantify product "cannibalism".
- Quantify the effect of product deletions on the overall product line.
- Identify how to increase preference share with non-customers.
- Quantify the impact of competitive actions.
- Measures price sensitivity.
- Identify market segments that represent the greatest opportunity.
- Answers virtually any "what-if" scenario.
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In a conjoint study respondents are asked to rate/rank a small number of product concepts (typically less than 30). These concepts do not necessarily represent actual products in the market. Rather they are theoretical concepts that are defined by statistics. From these ratings, it is possible to accurately estimate customer preference for thousands of potential product concepts that include any combination of the attributes being studied. This ability to model/predict preference for concepts not directly measured gives conjoint studies two key advantages over other methodologies. First, when testing a new product concept it is not necessary to disclose the actual concept in the survey itself. Second, a conjoint study acts as an insurance policy because it allows the market researcher to answer new questions that come up after data collection is completed.
TechWise Market Model
Choice modeling represents one of the most powerful market research techniques. These types of studies are designed to model the market for a particular category of products or services. There are many different statistical techniques that can be used to develop a market model. These include full-profile conjoint, adaptive conjoint, discrete choice, and hybrid conjoint, to name a few. Each of these techniques has its own strengths and weaknesses. TechWise has implemented all of these techniques in a number of projects. Based on this hands-on experience, we developed our own approach to market modeling studies. TechWise Market Model simulation studies are designed to answer critical questions that often determine the success of new and existing products
Questions TechWise Market Modeling Studies will Answer:
- What is the ideal combination of features and price to maximize our products' success?
- How should I price a new product in relation to our current products?
- Will this new product obsolete our current products or be a product-line extension?
- How much extra will customers pay for this new feature?
- Which competitors pose the greatest threat? How can we minimize that threat?
- What impact will competitive price moves have on my products? How should I respond?
- What is the best way to respond to a competitor's price drop?
A TechWise Market Model is a custom, robust market simulation methodology that lets you estimate preference share for your products. It uses data collected using a variety of techniques including conjoint, discrete choice, and hybrid conjoint.
Key Features Built into TechWise Market Modeling Studies:
- Ability to model complex markets and products. Most products cannot be adequately described by just four or five features (a.k.a. attributes). That is why TechWise Market Models can accommodate study designs with fifteen or more attributes. Furthermore, TechWise Market Models can be designed to simulate a total of up to 54 products at one time. The more complex a study gets in terms of attributes and products, the larger the sample size needed during data collection. Sample size impacts the overall project schedule and cost. That is why we work closely with our clients to identify which features are relevant to the purchase decision and should be included in the model.
- Ability to adjust for differences in brand distribution and awareness. Not all brands in the market have the same awareness and distribution. Most market simulators give you theoretical results that assume all brands have equal awareness. TechWise Market Models let you see these theoretical results. However, it also provides results adjusted for each brand's unique awareness and distribution.
- Ability to predict accurate preference share, both overall and for different market segments. TechWise Market Model simulators analyze data on a respondent by respondent level. This way, we can take into account each person's unique purchasing plans. Analyzing responses for each respondent, as opposed to analyzing all respondents as a group, helps make TechWise Market Models much more accurate at predicting current and future preference shares. TechWise Market Models are also designed to let you see results overall as well as by geography, customer size, and segment.
With a TechWise Market Model, you can make informed decisions regarding your product strategy that support your key objectives. If you are interested in learning more about TechWise Market Models, or to request a quote, contact us.
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