How can conjoint analysis help with both pricing research and branding positioning?

Conjoint analysis is one of the more robust pricing market research tools. Looking at the overall need, however, we view pricing market research is a critical marketing research function. Pricing research includes such tools as statistical conjoint, or trade-off analysis, with market survey research data from online surveys, personal interviews, or phone surveys. Conjoint analysis pricing market research typically reports price elasticity of both prices and product features to allow marketing managers to simulate market conditions and product positioning to adjust perceived product value, product and brand image, and price levels. Conjoint analysis has been successful in driving entire marketing strategy revisions, the Marriott segmentation and positioning of its hotel properties is but one visible example.

Conjoint Analysis for pricing market research -- Details

Conjoint is a popular marketing measurement and statistical technique that researchers and marketers use to understand how individuals value features and attributes of products or services by determining their tradeoffs between different levels of those features.

Conjoint Analysis Features

• Examines how consumers develop overall preferences for goods and services
• Assumes consumers take individual utility of each attribute and sum them to give an overall utility value
• Requires consumers to perform a simple task e.g. rating, ranking, choice, pairwise preference
• Requires consumers to perform a simple task e.g. rating, ranking, choice, pairwise preference
• Calculates a profile for each consumer
• Gives an overall profile or by segments
• Can be used to predict choice patterns

Pricing research such as conjoint analysis usually concentrates on customers' sensitivity to pricing. This price sensitivity is driven by many factors. First, it is driven by the nature of the market, the target within that market, the differentiation level of your product or service, and the value of your brand. If you are making decisions about the overall positioning of your brand, it is best to first tackle the positioning question. One way to think about this is to first assess your decision process and your current stage. Our discussion on the Decision Pathway may be helpful.

If you know your positioning strategy, and your decision is to better understand pricing sensitivity -- or, price elasticity -- within an existing market, there exist specific quantitative market research measurement methods which allow you to "trade-off" various product configurations with alternate price levels. Thus, "trade-off" analysis produces data from which possible price/feature combinations can be simulated producing estimates of market share under various scenarios. This technique is also known as "conjoint" analysis which comes from "considering attributes jointly."

Other methods of pricing research include market tests, in-store tests where prices can be varied store-to-store, and direct mail and internet split-cell price tests.