# Conjoint Analysis

Find the best combination.

What's the best way to introduce a new product, or change an existing one? You could just move forward boldly with a new idea and keep your fingers crossed that it works. Or you could reduce risk by doing market research – before you go through all the trouble of creating something customers don't want or don't like.

Getting a product 'right' involves a lot of variables. The most obvious feature is functionality - how it works. However, other things also play a role in the final purchase decision – such as packaging, promotion, materials, and even where a product is manufactured.

For example, people buy cars to get from point A to point B. The type of car they buy is based on many things, including fuel consumption, styling, reliability, and color. While any of these product attributes may be the primary selling feature, people make decisions by considering all the attributes together.

Getting all of these features in the right combination is pretty difficult if you just rely on guesswork. So, how can you evaluate your goods and services by considering their attributes all together, or jointly? 'Conjoint Analysis' accomplishes exactly that.

## What is Conjoint Analysis?

First and foremost, conjoint analysis is a tool that measures buyer preferences. Using statistical analysis, it establishes the impact on the buying decision of one combination of product attributes compared with other combinations. By doing this, you get an understanding of consumer preferences that's much deeper than simply asking consumers to rate individual product attributes.

For instance, a typical preferences survey tells a restaurant that customers rank their priorities as service, price, location, and then cleanliness. So the restaurant makes improvements to service and price, but sales don't increase significantly. They wonder what went wrong… until they try a conjoint analysis, which tells them that the combination of service and location actually ranks higher than the combination of service and price.

Conjoint analysis helps you truly understand consumer trade-offs. What are customers willing to trade if they can't get the perfect set of attributes? To get the warranty they want, will they pay a higher purchase price? To get the 10% discount they want, will they buy a package of eight, rather than a package of six? To get the performance they want, will they settle for fewer color options?

## Conducting a Conjoint Analysis

Conjoint analysis determines the utility (usefulness or desirability) values that consumers attach to different levels of a product's attributes. By showing potential consumers different product offer combinations, and asking them to rank the various offers, you can identify the most appealing combination of attributes. From there, you can make a business decision using parameters like estimated market share and profit potential.

To illustrate this approach, we'll use an example of a consumer goods company developing a new glass cleaner.

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