Conjoint (trade-off) analysis has become one of the most widely-used quantitative methods in Marketing Research. It is used to measure the perceived values of specific product features, to learn how demand for a particular product or service is related to price, and to forecast what the likely acceptance of a product would be if brought to market.
Rather than directly ask survey respondents what they prefer in a product, or what attributes they find most important, conjoint analysis employs the more realistic context of respondents evaluating potential product profiles. By understanding precisely how people make decisions and what they value in your products and services, you can work out the optimum level of features and services that balance value to the customer against cost to the company. The principle behind conjoint analysis is to break a product or service down into it's constituent parts then to test combinations of these parts to look at what customers prefer. By designing the study appropriately it is then possible to use statistical analysis to work out the value of each part in driving the customer’s decision. By analysing which items are chosen or preferred from the product profiles offered to the customer it is possible to work out statistically both what is driving the preference from the attributes and levels shown, but more importantly, give an implicit numerical valuation for each attribute and level.
By combining these market models with internal project costing, companies can evaluate decisions in terms of Return on Investment (ROI) before going to market.