Conjoint analysis in product management
Conjoint
analysis
It is a statistical technique used in market research to determine how people value
different features that make up an individual product or service.
The objective of conjoint analysis is to determine what
combination of a limited number of attributes is most influential on respondent
choice or decision making. A controlled set of potential products or services
is shown to respondents and by analyzing how they make preferences between
these products, the implicit valuation of the individual elements making up the
product or service can be determined. These implicit valuations (utilities or
part-worths) can be used to create market models that estimate market share,
revenue and even profitability of new designs.
Today it is used many of the social sciences and applied
sciences including marketing, product management, and operations research. It is used
frequently in testing customer acceptance of new
product designs, in assessing the appeal of advertisements and in service design. It has been used in product positioning, but there are
some who raise problems with this application of conjoint analysis.
Conjoint analysis techniques may also be referred to as
multiattribute compositional modeling, discrete choice modeling, or stated
preference research, and is part of a broader set of trade-off analysis tools
used for systematic analysis of decisions. These tools include Brand-Price
Trade-Off, Simalto, and
mathematical approaches such as evolutionary
algorithms or Rule Developing Experimentation.
Conjoint
/ Discrete Choice Analysis
Conjoint or Discrete
Choice Analysis elicits your market’s preferences for the components that make
up your product, including product features, service levels, brands, prices,
etc. Although there are differences
among the various conjoint and discrete choice techniques, for our purposes
here we will consider them as a group and refer to them as conjoint. As a product manager, you can leverage conjoint
to:
·
Understand your market’s requirements
·
Determine your business case and the
market feasibility of your product
·
Scope and define your product offering
·
Create a differentiated product
·
Price your product
·
Plan your product and extensions to
optimize your objectives
·
Assess possible responses to competitive actions
Anytime you need to
make tradeoffs among different aspects of an offering, you should consider
using conjoint analysis. A conjoint study forces respondents to make tradeoffs
and, therefore, uncovers their hot buttons. With conjoint you can understand
which features, services, and brands are most important to your target market,
the level of price elasticity, how likely your market is to purchase your
product, how preferred your product is versus the competition, whether there
are attractive preference-based segments for your product, how you can drive an
increase in preference for your product, whether you should consider product
line extensions and the extent to which multiple product offerings might
cannibalize one another.
In short, conjoint
helps you uncover a wealth of information. You will be better equipped to make
the tradeoffs you need to as a product manager by getting respondents to make
the tradeoffs for you.
Perceptual
Mapping
Perceptual mapping
uncovers how the market perceives your product in relation to your competition.
It gives you a visual representation of the market, helps you determine what is
most important to your market, and helps to uncover opportunities for your brand
by seeing gaps along those important factors. As a product manager, you can
leverage perceptual mapping to help you.
·
Differentiate your product offering
·
Position your product or brand
Anytime you’re trying
to understand how the market perceives your position in the market place, you
should consider perceptual mapping. To position your product effectively, you
need to know what’s important to your market, how your customers perceive your
performance in those areas and how they perceive your competition’s
performance. Perceptual mapping helps you uncover those perceptions so that
your product’s strengths, weaknesses, opportunities and threats become evident
through the proverbial picture that’s worth a thousand words. The end result is
a winning, sustainable positioning for your brand.
Submitted by
Pixy Rain
Team F
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