Leverage a conjoint study to understand what the consumer values and how much they value it

A client of mine was facing a new entrant to the market that was gaining share with a similar but slightly more premium product. The question my client was struggling with was: What does the consumer really want? Do they want a basic value product? Do they want a more premium product? Are they willing to pay for premium features? How much are they willing to pay for premium features?

We leveraged a conjoint study to answer these questions.

A conjoint survey is a series of questions where a consumer selects between two options or more options of similar products with different features at different price points. Here is an example:

In a conjoint survey, consumers are asked a variety of choice based questions where they need to select their preferred product price point combination. Often conjoint surveys have varying combinations of features so that different consumers see different combinations. This allows for a much broader set of data collected and enables the calculation of of utility (value) by feature. This informs how much a consumer is willing to pay for each feature.

The results of this study determined that there were two different segments of customers preference and willingness to pay. High use consumers valued and were willing to pay for better quality features (almost all feature improvements) while recreational use consumers were much more sensitive to price and did not want to pay for feature enhancements.

While high use consumers were willing to pay for all premium features, there were some features where the value to the consumer did not warrant the addition of the feature to a premium model. In some cases, adding a feature would have degraded margin because the value to the customer was not in line with the added cost to production.

The benefits of understanding what features consumers care about and how much they value each feature is helpful beyond strategically pricing current products. It can help determine what are the most profitable products for the future.

The outcome was for the manufacturer to develop a new premium line product while maintaining their market presence with their value base model.

If you would like to talk more about conjoint studies, please e-mail me at stacy@pricingvelocity.com