Editor’s note: Jonathan Schneider and Liz Vandenberg are the founders of Square One Research, Atlanta.
Since its introduction in the 1970s, conjoint analysis has become one of the researcher’s most trusted tools to support the product development process. The methodology offers the ability to quickly isolate a product’s individual attributes that drive buyer preference while also identifying features that have marginal or negative impact. Results that easily enable various what-if scenarios also make conjoint analysis an ideal choice for clients who demand action-oriented results.
Researchers have applied conjoint analysis to questions related to advertising, pricing, and even package design. The Internet presents another opportunity for its use as a robust decision-making and trade-off analysis tool. Most firms acknowledge that they must have some kind of online presence. But the enormous financial opportunities of the online market give rise to sizeable questions: Should we sell online? Who should we target? What products should we offer? What type of customer service should we provide? What are suitable product delivery timeframes? Companies must make careful choices as the decisions can have far-reaching impacts on the organization and its bottom line.
In this article, we will examine the application of conjoint analysis to support Web site development, using HairInc, a fictitious company based on an actual former project, to illustrate study preparation, fielding, and the application of results.
HairInc needed to make just the kind of tough choices we have described for its new HairInc.com venture. As one of the nation’s leading manufacturers and suppliers of professional grooming tools and hair care products, HairInc desired to grow its business and improve its margins by doing business online. Yet the company’s firmly embedded sales process - exclusively through local franchise distributors - made Internet sales a tricky proposition. The online portion of HairInc’s business needed to cooperate with the distributors and find innovative ways to satisfy customers’ currently unmet needs.
HairInc was also unique in that it had three distinct customer segments to consider: salon owners; stylists; and cut-it-yourselfers (CIY) not currently served by distributors. Adding one more element of complexity to the situation, HairInc was considering online partnerships with several companies that would enable it to sell complementary products such as freestanding hair dryers, styling chairs, and salon management software.
Thus, HairInc’s informational needs were to 1) understand what product and pricing options would be most successful on the new HairInc.com, 2) determine which site features would drive preference and which would have marginal and negative effects, 3) determine the type of customer service necessary to support HairInc.com, and 4) decide if the site should target only existing customer segments or include the previously underserved CIY market as well.
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Planning for conjoint
After taking into consideration HairInc’s complex informational needs, its budget and timeframes, we recommended a conjoint study. The first step of the project involved determining all of the potential features or elements of the new site that would serve as the conjoint test stimuli. Elements would take the form of text statements such as “salon management software,” “overnight delivery,” and “24-hour customer service.”
The process benefited from an earlier round of focus groups that yielded a number of options for the overall HairInc.com strategic direction, product offering, pricing, features, and functionality. That information along with several internal brainstorming sessions helped the team develop approximately 55 to 60 different elements.
The next step was the creation of approximately 100 HairInc.com “concepts,” or various combinations of the elements. While each HairInc.com concept contained approximately five elements, high-level categories dictated the type of elements within each concept. All HairInc.com concepts contained elements related to must-have categories such as “product offering,” “pricing,” and “customer service.” A concept’s remaining two elements came from various nice-to-have categories, such as product warranty, delivery, and recruiting, that were not necessarily critical to include in HairInc.com.
Figure 1 shows examples of concepts and their related elements.
Although conjoint analyses may employ any one of several design techniques (e.g., ratings, rankings, paired comparisons, etc.), the HairInc.com project used a rating method. The study called for research participants to rate each concept in terms of likelihood to use the site (1 = not at all likely, 10 = very likely) in the absence of any other concept.
Fielding the study
While fielding a conjoint study online is an option for some projects, the incidence of HairInc’s target audiences dictated that the project be offline. To ensure consistency of data collection, salon owners, stylists, and CIYers were recruited using screening criteria and geographic markets from the earlier focus groups. Participants came to a research facility where they read a general statement about HairInc.com and then rated approximately 75 to 100 concepts. An example of a concept is included in Figure 1. All concepts were displayed on computer screens with several graphical elements included to produce more of a Web look and feel.
While travel to central research facilities was a necessary aspect of the study, participants individually rated all of the concepts. For hard-to-reach and time-strapped targets like salon owners, conjoint offered multiple opportunities to complete the study, limited only by the operating hours of the research facilities. As long as the desired sample size for each target was reached, scheduling sessions at various times presented no issues for data collection efforts.
Interpreting the results
With the help of regression analysis, the research data enabled HairInc to determine the effect that an individual element would have on the percentage of participants giving a HairInc.com concept a top three-box score (in this case an eight, nine, or 10). While the analytic process may sound complex to some, actual conjoint data is relatively easy to explain, interpret, and can be quite fun for a client to play with as he or she creates multiple what-if scenarios.
Optimizing the HairInc.com site offering for various target audiences first focused on determining which elements, when combined together, would create the greatest percentage of respondents giving HairInc.com a top three-box score. For the HairInc.com team, some of these elements would require minimal development time while others would require a longer and more costly commitment. Next, the data revealed which elements had only a marginal impact on overall preference. (It is interesting to note that some of these elements seemed like must-haves during the focus groups.) Finally, we determined which elements would actually have a negative impact on a segment’s likelihood to use the site.
Understanding which elements were critical to overall site success while being able to place others on the back burner was invaluable in helping the HairInc team prioritize development efforts and properly allocate its HairInc.com budget. Yet, the data also enabled HairInc to make larger, more strategic decisions. For example, results suggested that stylists and CIYers favored many of the same elements. And, salon owners seemed relatively lukewarm to the overall concept regardless of its elements. Therefore developing a site that focused on the needs of one core market, stylists, would allow it to meet the needs of a new market without much incremental effort.
HairInc also realized that online sales of such items as salon chairs and freestanding hair dryers - items that only a salon owner would purchase - was going to be difficult. For HairInc.com, it was not necessary to formally partner with complementary product manufacturers, as incorporating their wares would have only a marginal effect on site success.
Straightforward means
In the post-dot-com era, perhaps one of the most pleasing aspects of conjoint analysis is its rationality. The methodology gives companies a straightforward means to narrow the dizzying choices that come with doing business on the Internet. In addition, and unlike some techniques, conjoint benefits from input from a variety of stakeholders. Senior management, internal teams, outside agencies, and past research participants can all help develop the study without necessarily adding to its complexity. As the Internet continues to grow in importance for more and more organizations, an inclusive research methodology such as conjoint should be most welcomed.