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Ajjan Associates, LLC

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Improve your grasp of  Pricing Strategy & Consumer Behavior 

In a world of complex product lines and service offerings, value is lost because sellers cannot accurately determine what customers are willing to pay for product features and attributes.

Companies cannot capture their market with random and haphazard pricing strategy decisions.  The winning firms will be those who develop and price their products, especially those with new or highly desired features, according to market demand after scientifically collecting data from target customers.

Conjoint Analysis

Our techniques compute mathematical values to explain consumer behavior -  how much value is placed on price, or location, or features, etc. and then correlates this data to demographic, lifestyle, or other consumer profiles.

A software-driven regression analysis of data obtained from actual customers makes this possible.

As a result of conjoint, the current product offerings or price can be tweaked to match consumer behavior and expectations.

Also, vulnerabilities, like weak brand or uncompetitive prices, can be exposed with conjoint analysis.

Eligibility

Eligibility for the conjoint analysis model requires a relatively large number of respondents to a marketing survey.  For this reason, it is usually best suited to B2C applications, as data can more easily be collected from individual consumers.

Conjoint Method

First, select what attributes of the product you would like to test, and what the possibilities are for each attribute.  For example, one of our textbook projects concerns the compact disc, for which we might want to know consumer attitudes about:

Litmus Tests for Conjoint Analysis

1. Do I have the right pricing strategy?

Conjoint Analysis determines how your customers trade-off different price levels versus the features of your product that they most desire.

2. How important are new features?

Conjoint Analysis tells you the must-have features of your product segment by segment, so that you can tailor your marketing efforts.

3. Does my brand matter?

Conjoint Analysis allows you to discover what factors drive consumer behavior:  brand, price, or features.

If you have been asking yourself these questions, then Conjoint Analysis is for you!  Read more...

Sample of a Conjoint Survey

Above:  Click on the sample card above to view an actual online conjoint survey.  Ajjan Associates can help you  use this powerful method to understand consumer behavior.

more services from Ajjan Associates:

Decision Calculus - Risk Analysis - Resource Allocation

• number of preferred tracks on the cd out of 12 total (1, 3, 6 or 9)

• price ($7, $10, $12, $15)

• included literature (elaborate, basic)

• DVD bonus features (has, does not have)

• purchase availability (any store, web only)

What is more important to the consumer - bonus features or liner notes?  How much "extra" would someone be willing to pay for a cd with a lot of tracks that he/she liked?  Would the customer by willing to click to a dedicated artist website to purchase the cd if it was not available in stores?

The scientific way to answer these questions is to test each of the 5 attributes in the context of the others.  To do that, we take each of these descriptors and create a series of "hypothetical" products, each with 5 attributes.  The software creates templates for 16 of these, and we portray the description of the proposed product visually, on a "card", like so:

Click for an online example of this actual conjoint analysis survey

The consumers will be asked to read each of the 16 cards, and then assign a ranking of some kind (using numbers 1-x, or using adjectives like favorable, unfavorable, ideal, etc.)

Perhaps Card #1 has 6 out of 12 "good" tracks, $12 price point, no DVD features, simple liner notes, but is available in any store.  Maybe #2 has 9 "good" tracks, but it's priced at only $7, has DVD features, but can only be purchased on the artist's website directly.  The process goes on with 16 mathematically designed cards that offer all the relevant combinations of choices.

Conjoint Results

Given the consumers' ratings of al 16 diverse combinations, the software package computes a mathematical regression to tell us how important each of the five factors is to the individual responding consumer, and to the group of responding consumers as a whole.

So we'd know that consumer X bases 55% of his decision on price, 25% on the number of tracks, 15% on DVD features, and is virtually unconcerned about liner notes or availability.

In addition, each consumer will be asked a number of informational questions to create a demographic profile, so that we can compare the results and analyze them based upon income, age, location, internet usage, and other variables that may affect consumer behavior.

Maybe internet users who download are more concerned about DVD features that they couldn't find for free online.   Maybe younger consumers are more likely to buy from the artist's website directly.  Perhaps older consumers prefer printer liner notes and an elaborate booklet included.  All of these facts will be mathematically predicted using conjoint analysis.

The end result is a quantitative, robust analysis of what consumers really want, with each attribute evaluated in the context of the others, incorporating the trade-offs that ultimately project the greatest influence on consumer behavior.

Please fill out the form to the right to learn more about the design and implementation of this powerful technique.  We would be more than happy to schedule an initial free conjoint consultation to understand how our conjoint techniques can help you, either by phone or in person.

We do not view distance as an obstacle, as we have deployed surveys both face-to-face and over the internet, allowing global capability that will put your firm's marketing activities on the cutting edge.

Conjoint Examples

Music Industry - in a world of free downloads, how much are music fans still willing to pay for compact discs or DVDs?  Our conjoint analysis showed the price sensitivity in detail and provides a clear blueprint for reforming the current business model. online version

PO Box 4031 - Clifton, NJ  07012  USA

george@ajjan.com - +1 (201) 914-5882

Conjoint Analysis - Risk Analysis - Decision Calculus - Resource Allocation