Have you ever had to choose between two options where there’s something you like about both? Perhaps you’re booking a hotel for a weekend city break and need to decide where to stay. The first hotel you find looks very plush, is located near the city centre and has a great spa, but it also comes with a hefty price-tag. The second one is housed in a more modern building, offers a great breakfast buffet, is somewhat cheaper, but it’s quite a bit further out from the city centre. So, which hotel would you go for?
The answer will depend on how important each of these features is to you. For someone who is price conscious, or who likes a big breakfast, the second option might be more appealing. However, for someone who values the convenience of not having to travel far, the first one might be the clear winner.
If you were to try to directly measure the importance of all the different possible features of a hotel in a survey, you’d end up with a long, unwieldy questionnaire. And, even worse, you’re unlikely to end up with anything particularly useable or actionable. This is where conjoint analysis comes in.
What is conjoint analysis?
Conjoint, named by fusing the words “Consider Jointly”, is a proven approach which can help you determine what customers prefer when faced with competing alternatives in the market. It alleviates risk when making important business decisions by giving you an interactive, data-driven tool which will enable you to either build from scratch or fine-tune an offer in order to maximise share of preference, work out optimal pricing and even build different tiers of propositions, appealing to different consumers.
How does conjoint analysis work?
Conjoint analysis replicates what customers do in real-life situations. Consumers rarely consider the relative importance they attach to different attributes in isolation. More often than not, they evaluate products and services as a whole and make a choice of what to buy after considering all the alternatives. In conjoint (more specifically choice-based conjoint), a statistical process generates several alternative bundles of a product or service, all with varying levels of features and prices. By observing the choices people make between these alternatives, and with the help of some advanced statistical estimation techniques, conjoint determines a ‘utility’ value for each element of the product or service. As it estimates this value for each respondent individually, subsequent analysis can estimate share of preference amongst thousands of different alternatives, each with different brands, service levels or product features and prices. This is all packaged in a user-friendly simulation tool which you can control.
User friendly outputs with a conjoint simulator
With a conjoint simulator, you effectively have at your disposal the results of thousands of different surveys on how consumers would vote, given whichever alternatives you have chosen to be placed in front of them. The number of votes can be analysed by different demographics. You can even use their responses to create different consumer segments. The analysis can be further turbo-boosted by adding cost information. This way, the simulator not only tells you share of preference, but can also estimate profit levels. We can also output demand curves, so you can visually understand the elasticity of demand for your product or service given a specific competitive set.
Conjoint analysis has helped thousands of businesses, both large and small, for dozens of years. It has both been used to build new products and to refine existing ones. When you next choose a hotel, a smartphone, or even a frozen pizza, chances are that conjoint analysis has been used in constructing the offer and determining the optimal price.
3 ways businesses can use conjoint analysis
The process provides business with valuable insights to help them navigate their way through crises like the current cost-of-living crisis. With price rises here for the long term and an increase in disposable income even further away, it’s more important than ever that businesses hone the make-up of their products or services. Through conjoint analysis, this can be done in one of three ways:
- Helping business to understand what product or service features to alter in order to save costs but retain as much share as possible.
- Targeting segments which are less affected by the cost-of-living crisis in order to grow share of that lucrative segment.
- Creating a new product, service or line extension which would appeal to customers finding themselves with a lower disposable income.
Conjoint analysis with Yonder Data Solutions
Whatever the intention, our team are seasoned specialists in conjoint. We’ll walk you through the process from beginning to end, and our experts will work with you to make it impactful.
We combine advanced analytics with our high-quality data collection solutions to provide seamless integration of stats solutions within our surveys. Conjoint analysis is just one of a wide suite of advanced analytics approaches that we can offer to meet a range of different needs and gain deeper insights.
To get in touch, please contact Shashi Lakhani.
