342: Conjoint the correct way – with Patty Yanes

A tool to help product managers understand what features customers value

Today we are talking about conjoint analysis, which is a tool you can use to make informed decisions about what customers value and what they will pay for.

If you have to make decisions about what features to include in a new product or the next version of a product, what price to charge for a product, or what the impact on market share will be by introducing a new product, then this discussion is for you.

To learn about Conjoint Analysis, we are talking with Patty Yanes, a market researcher who has led numerous research projects that resulted in new insights about customers and a deeper understanding of their needs. Patty is with Applied Marketing Science (AMS), a firm dedicated to helping product managers with market research. AMS was founded by an MIT professor and is well respected for the work it does.

Summary of some concepts discussed for product managers

[1:49] What kind of problems does Conjoint Analysis solve?

Conjoint Analysis is the industry standard for understanding the features to include in a product. It helps you find out how much people are willing to pay and is the best way to figure out pricing.

[2:56] What are some other tools similar to Conjoint Analysis?

* Van Westendorp: a quicker and easier but less reliable method of pricing

* Gabor Granger: another pricing test

* Max/Diff (maximum difference scaling): a method of ranking features without considering price

* Turf Analysis: a method to understand which bundle of features will allow you to reach the most customers

[5:29] Take us through an example of Conjoint.

Let’s take the example of a pair of headphones. First, we must make sure we have the right inputs. Inputs that affect the customers’ decision to purchase the headphones are: brand, how it fits on the ear, whether it’s wireless or noise-cancelling, and the microphone. You’ll also need to determine your price, which could vary from $20 to $500.

[7:54] How does segmentation fit in?

Segmentation can be part of the process of designing your study or it can be part of cutting the data on the back-end to see how the results vary. For instance, you might create two separate studies for two different headphones, one for gamers and one for audiophiles. Or if you want to develop just one product that you will market differently to different segments, you would design one study with all the attributes and then cut on the back-end to see what’s more important to a gamer vs. an audiophile.

[9:27] What’s the next step in Conjoint Analysis?

Make sure you’re talking to the right people. You need a significant sample size including all the people who are part of the decision to purchase your product. We recommend 300 people, with a minimum of 100 per segment.

Once we’ve designed our Conjoint study, we pre-test our survey. We talk to people in the field to make sure they’re understanding our survey and we’re understanding their answers.

[12:23] How do you recruit and incentivize study participants?

We use research panels that are already in existence. The incentives may have to be quite high since people’s time is valuable. Scrappy solutions include talking to customers in a store or reaching out to friends and family.

[15:29] Tell us more about the pre-test.

We recruit a small sample of the same type of people who would be taking our general survey and run through the survey with them. We ask them questions to discover what assumptions they’re making about the survey and whether they understand the survey in the way we expect.

[17:35] How do we field the study?

We go into the field with a panel, send the survey out, and get the data back. Then, before analysis, we clean the data,