Conjoint Analysis: Product Portfolio Optimization

Sawtooth Technologies, Inc.

In this case study Sawtooth Technologies, Inc. conducted research into consumer preferences regarding various features and pricing of online classified ads. The objective was to develop an “optimal” product line that would increase sales volume.

Situation
An online services business wished to grow by expanding its product offerings to appeal to different segments of the market.

Research Steps

1. Created a computer-based interview using conjoint analysis to allow consumers to express their trade-offs between attributes such as brand, price, number of days the ad would run, number of photos, and other features.
2. Calculated utilities that represented the value each interviewee placed on the various product features and pricing.
3. Built a model of the market, featuring both a demand side (utility values) and supply side (available products).
4. Predicted the likely appeal of the client’s product as it was currently configured and modeled a variety of scenarios:
   • Added basic and premium products to the line to appeal to different segments of the market.
   • Tested various combinations of features and pricing across the three client products with the objective of minimizing cannibalization and maximizing differentiation across products in the line.
   • Compared outcomes to determine which scenario resulted in the greatest market preference.
   • Predicted competitive responses to the clients’ actions and modeled these actions, comparing outcomes under varying competitive situations.

Research Results
We recommended a tiered set of product offerings to appeal to different market segments. The model predicted that this enhanced product portfolio would lead to increased volume for the client’s business.

Outcome
The client integrated our recommendations into their product offerings and developed a timeline for implementing additional product enhancements over a two-year period.

This content was provided by Sawtooth Technologies, Inc. Visit their website at www.sawtooth.com.

[Jan 26, 2010]