Aside from my work with product strategists, I’m also a quant geek. For much of my career, I’ve written surveys (to study both consumers and businesses) to delve deeply into demand-side behaviors, attitudes, and needs. For my first couple of years at Forrester, I actually spent 100% of my time helping clients with custom research projects that employed data and advanced analytics to help drive their business strategies.
These days, I use those quantitative research tools to help product strategists build winning product strategies. I have two favorite analytical approaches: my second favorite is segmentation analysis, which is an important tool for product strategists. But my very favorite tool for product strategists is conjoint analysis. If you, as a product strategist, don’t currently use conjoint, I’d like you to spend some time learning about it.
Why? Because conjoint analysis should be in every product strategist’s toolkit. Also known as feature tradeoff analysis or discrete choice, conjoint analysis can help you choose the right features for a product, determine which features will drive demand, and model pricing for the product in a very sophisticated way. It’s the gold standard for price elasticity analysis, and it offers extremely actionable advice on product design. It helps address each of “the four Ps” that inform product strategies.
Product strategists struggle with the issue of value all the time: What constitutes a revenue-maximizing price for my product, given the audience I’m targeting, the competition I’m trying to beat, the channel for purchase, and the product’s overall value proposition?
There are tools like conjoint analysis that can help product strategists test price directly via consumer research. However, there’s a bigger strategic question in the background: How can companies create and sustain consistently higher prices than their key competitors over the long term?
The Mac represents a good case study for this business problem. Macs have long earned a premium over comparable Windows PCs. Though prices for Macs have come down over time, they remain relatively more expensive, on average, than Windows-based PCs. In fact, they’ve successfully cornered the market on higher-end PCs: According to companies that track the supply side, perhaps 90% of PCs that sold for over $1,000 in Q4, 2009 were Macs.
Macs share common characteristics with Windows PCs on the hardware front – ever since Apple switched to Intel processors about four years ago, they’ve had comparable physical elements. But the relative pricing for Macs has remained advantageous to Apple. At the same time, the Mac has gained market share and is bringing new consumers into the Mac family – for example, about half of consumers who bought their Mac in an Apple Store in Q1, 2010 were new to the Mac platform. So Apple is doing something right here – providing value to consumers to make them willing to pay more.