Planning Innovations: Conjoint Analysis Slides

How to Use Conjoint Analysis in the

Innovation Process “If you can’t describe what you’re doing as a process, you don’t know what you’re doing.“- W. Edwards Deming – Father of Quality Movement

© Copyright Survey Analytics | 3518 Fremont Ave N #598 | Seattle WA 98103

Who is Planning Innovations Group?• Started in 2002 in Portland, OR• Clients from startups through Fortune 500 • GE, Tyco, Motorola, Owens Corning

We give companies tools and methods to innovate faster and more efficiently

Dorian SimpsonManaging Director and Lead Consultant

www.planninginnovations.com

www.planninginnovations.com© Copyright Survey Analytics | 3518 Fremont Ave N #598 | Seattle WA 98103

Today’s Agenda

• What is Conjoint Analysis?• An overview of the Innovation process• How can we use “Conjoint Analysis” to innovate?

How can Conjoint Studies that provide guidance in innovation planning?

• How do you develop a conjoint study? How can Conjoint Studies help you predict potential market share for new

product concepts?

• Case Study: Aperion Audio Speakers• Q&A


What Is Discrete Choice Conjoint Analysis?

• Quantitative research toolo Forces customers to make choices

similar to real lifeo Derive “utility” value of attributes

and levels from these choiceso Very powerful.. And dangerous

• Limitation: closed exploration

• Applications:o Brand valueo Feature trade-offso Potential market shareo Product competitivenesso “What if” scenarios o Price elasticity

www.compareandsave.com

Attributes

Levels

TV’s on Bestbuy.com

Customers must always make feature/price tradeoffs…

How important is… Refresh rate?

Resolution? Picture-in-Picture?

… to the purchase decision? To the

price?

A Short Intro to Innovation Processes


Capturing Ideas and Opportunities?

Customer Problems?Trends of Interest?

Feature priorities? Value questions?

Market size? Pricing?

Take rate?

Usability? Readiness?Messages?

Marketing and Sales Programs?

Questions through the Innovation Life Cycle

Research techniques must reflect innovation stage


Two Major Stages at the Front End of Innovation

Discovery(Divergence)

Validation(Convergence)


More Specifically…

Divergent Methods- Customer Problems? Trends?- New opportunities!

Goal? A wide range of potential, valuable opportunities that can drive your strategic and development activities

Divergence Methods

ConvergenceMethods

Convergence Methods- Evaluation, numbers, priorities- Validated opportunities

Goal? A quantified opportunity leading to a valid business case to fund, kill, or shelf


Conjoint in the Innovation Process?

• “Innovation” has some unique goals:o Ability to focus R&D efforts o Necessity to understand and quantify customer needso The need to quantify the value of technology investmentso The need to investigate value/investment tradeoffs... E.g.

If we solve this… or do a better job, what is it worth to customers? If we build this, how many will we sell over current models? How might this new capability (or feature) canibilize sales?

o Conjoint Analysis can help answer these questions more accurately than ranking or general price sensitivity questions.


Case Study: Aperion Audio Discrete Choice Conjoint

Aperion Audio• High quality audio• Direct to consumers• What factors drive

consumer decisions?• What value do they

place on certain features?

Need answers to: • Direct R&D efforts• Position products• Develop messages

and promotions


Overview

• 97 Responses o Guide general direction (200+ provides statistical validity)

• Online discrete choice conjoint via Survey Analytics • Targeted homogenous database: Aperion internal

o All audiophiles, mostly meno 57% previously purchased an Aperion producto 84% completion rate

• Goalso Understand preference of various subwoofer formatso Estimate the relative value of different features and functionso Provide guidance on how customers are thinking about

Relative importance of features Value associated with features


Tradeoff Exhibits

Six Attributes + Price• Pictures help

customer visual options

• Organize similar to real world

Levels• Goal – keep levels low

to minimize quantity of respondents necessary and enable simpler options


Conjoint Design

Consistent AttributeProving a consistent

visual display of attributes and levels helps the user stay refreshed of their

options.

Options trade-offThe core of the study is

having respondents decide on a preference to a specific bundle of features at a specific

price.


What Are We Looking For?

• Results we didn’t expecto Which utilities surprised us? Why?

• Clues to how customers are really making decisionso Which features or functions are

driving real decisions? o Which features could be even

further emphasized or enhanced?

• Following these clues further can lead to:o Owning new positions in the marketo Higher margin products and

serviceso Clearer guidance to development

efforts

UtilitiesNumerical representation of the value respondents place on each level of an

attribute using an arbitrary scale.

Relative ImportanceBased on utilities, we can calculate how

important each attribute is to the respondent’s overall decisions.

Market SimulationsProving a consistent visual display of

attributes and levels helps the user stay refreshed of their options.


Sample Learning

Power is critical to the decision!

Almost one-fourth of the decision is based on the power rating – requires

further investigation. How are consumers

thinking about ‘Power’? Is this a proxy for sound

quality?

Frequency was relatively

unimportant!Even with a wide

frequency range, it was still only 5% of the

consumer’s decision. Why is that?

In this price range, there was less emphasis on price than expected.

Certainly an area that Aperion will want to learn more about. E.g. Are they underpricing?


Considerations for Using Conjoint to Innovate

1. Just like all research, don’t treat results like “answers”o Results provide clues, guidance, and additional datao Identify interesting data that can guide next stepso New concepts may require further research to better understando Triangulate! Use conjoint along with other data from online surveys,

through social networking, focus groups, and expert opinion, etc.

– Conducting fast, cost-effective conjoint studies early and consistently can provide a competitive advantageo Waiting until the product is “nearly complete” means results are

academic or can only be used for outbound marketing o Multiple stages of Conjoint Analysis can fine-tune specific features,

attributes, pricing, and promotion strategies

How Do You Develop a Conjoint Study?

Planning Innovations: Conjoint Analysis Slides

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