Conjoint Analysis is used to make better business decisions. Most of them are related to product and price, but others are possible.
Sometimes you’ll hear about discrete choice or choice based conjoint in place of the more generic term conjoint analysis. Although we use the terms interchangeably, we usually mean discrete choice because it best mimics what consumers do; make choices.
Choice ProbabilityThe statistical model predicts the probability that each option will be chosen. Because there is uncertainty in that calculation, the projection if averaged across several realizations from the model. That gives us share of choice – it’s kind of like market share, but not exactly.ShareThis share of choice is purely about demand. However, sales […]
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AssumptionsIt’s tempting to not want to make any assumptions. However, not making any assumptions is the same as the default assumptions which is usually the wrong way to go. For conjoint, the assumptions we need are either about the costs and accounting of the company or the supply conditions in the market. By providing better assumptions, the […]
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Two reasons it doesn’t work outFirst, respondent quality matters. It matters a lot. Poor respondents are typically a little less price sensitive. If less than 2% of the sample are poor respondents that is enough to wreck your price curves. It has little impact a little impact on units forecast. And you probably won’t even […]
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Frequently asked forWe see a specific request for willingness to pay (WTP) in nearly every RFP related to conjoint analysis. Companies want to know how much they can charge if they include new or innovative features. Unfortunately WTP is poorly defined. Companies may want an understanding of how people are willing to part with for new […]
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Source of volume is multidimensionalFor source of volume the main thing you will want to look at is how units shift among the competing products. For example, if your product gains 300 new units for a new scenario, it is reasonable to ask where did those units come from. How much of that is cannibalization […]
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TipIf your in going objective is to explore new-to-the-market products, be sure to leave a few empty columns to the left of the base case. It’s a little easier to access the new products/columns where they are at the beginning/left.How many products can you have in the simulator?You can have as many as you want/need. There […]
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Which features are the most profitable to deliver?How much value do consumers place on different features? This can include features that are currently in the marketplace or hypotheses about new features you think might move the needle.Context mattersThe amount of demand for a product/services is dependent on how much consumers like it (utility) and the […]
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How much should the company charge to get the most profit?It’s an important business question. Knowing how much to charge for a product/service can make the difference between profitability and bankruptcy. After field experiments (which can be ultra expensive) a discrete choice study is the best way to inform pricing strategy. Because you get an […]
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You can use conjoint analysis to answer a lot of business questions. Most of them are related to product and price. We are going to use a simulator example to show you how to answer some of the most common business questions that come up.This article will give a brief introduction to a few key […]
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