The vital process of continuous research, development and roll-out of new products is key in the long-term success and longevity of any business. New products drive company revenues, market share, and bottom lines.

Should we offer our business travelers more room space or a fax machine in their room? Should we offer more leisure-time activities (sauna, exercise room, tennis courts) or more food related services (several dining options, vending machines, in-room kitchen facilities)?

Statistical Reasoning can help determine what your target customers are want and need, and in some cases, how they will respond to your new or modified product.  One way of incorporating the structure of customer preferences into the new product design process is to apply Conjoint Analysis.  Conjoint Analysis can aid in:

• Designing new products that enhance consumer utility
• Forecasting sales/market share of alternative product concepts
• Identifying market segments for which a given concept has high value
• Identifying the "best" concept for a target segment
• Pricing products/product bundles
• Positioning new products to different segments

Conjoint Analysis
Conjoint Analysis is premised on the presumption that new product concepts involve important tradeoffs affecting design, production, marketing, or other operational variables.  Conjoint then helps evaluate how customers make such tradeoffs between various product attributes (a decompositional approach).

The basic outputs of conjoint analysis are a numerical assessment of the relative importance each customers attaches to attributes of a product set, as well as the value (utility) provided to each customer by each attribute option.  Specific requirements for conducting Conjoint Analysis include:

• Product/service is realistically decomposable into a set of basic attributes
• Product/service choice tends to be high involvement
• Factorial combinations of basic attribute levels are believable
• Desirable new-product alternatives can be synthesized from basic alternatives
• Product/service alternatives can be realistically described, either verbally or pictorially
• Perceptions of hypothetical combinations are reasonably homogeneous across members of the target group