The economic slump has consumers clenching their wallets, and beginning to differentiate between their needs and wants as they become more conscious of utility maximization; thus making it hard for companies to keep abreast of consumer supply and demand. In marketing there exists a direct connection between the wants and needs of the customer and the products or services a company offers. Often times, as pointed out by Alastair Muir (Design of Experiments/Conjoint Analysis in Marketing) there is a lack of statistical data on the vital attributes that influence the consumer process of making decisions to buy.
Solution – Conjoint analysis, the most powerful statistical technique for acquiring the data needed and for making the connection between consumer and product. In using the conjoint analysis marketers are able to identify the features that create the perceived value for their product or service.
The information generated from the conjoint analysis can be employed in a marketing environment because of its capability to measure consumer preferences for alternative product concepts. Conjoint analysis offers respondents various hypothetical attributes and levels for ranking; providing marketers with consumer’s most appealing products and/or services; while giving an estimation of the market share and profit that companies might realize.
As with any analysis, conjoint analysis faces possible disadvantages, as stated by Burton and Zinkhan (Demonstrating the managerial benefits of conjoint analysis); the validity of results generated from the analysis could be threatened by respondents who invest insufficient effort into the initial ranking tasks. Moreover, to achieve adequate results it is extremely important to make the conjoint task meaningful and to sufficiently motivate respondents. It is also very important to include all key product or service attributes in the conjoint task to generate the greatest and least utility.
In keeping in mind the posing disadvantages; conjoint analysis is very beneficial in a marketing environment because it allows you to work out the hidden rules consumers use to make decisions and helps to determine what they truly value in the products and services they purchase.
Advantages of the conjoint analysis also reside in the conjoint analysis questionnaire in its ability to stimulate the purchase decision and enabling managers to experiment with prices and product attributes to “fine-tune” their product or service. Altogether, this breaking down of products and services into attributes and levels is an extremely powerful tool for examining what a business offers and what it should be offering, as well as what a consumer is willing to buy.
In turn, within the current economic fluctuation, conjoint analysis can support further product design, pricing strategies, and marketing plans to help companies stay-in-tuned with consumer wants and needs.
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