How do you calculate your market size and the serviceable obtainable market??

This is a crucial part of any business plan, allowing you to gain a clear idea of how many customers you can potentially reach and how much revenue you can generate. This allows you to make more concrete plans and secure budget and buy-in from key stakeholders..

Top-down market sizing is one of the two main methods we can use to calculate the serviceable obtainable market.  In this article, we’ll take a look at what top-down market sizing involves, how you can use it in your own business, and the strengths and weaknesses of this approach.

What is top-down market sizing?

When we calculate our serviceable obtainable market, there are two main ways to approach the calculation: top-down and bottom-up.

  • Top-down market sizing starts by looking at the current market as a whole, taking a macro view of all the potential customers and revenue, and then narrowing it down to a section you can realistically target. This gives you your serviceable obtainable market, (SAM).
  • Bottom-up market sizing, on the other hand, is where you start with your own product and the basic units of your business and work out how you can scale them. Where can your products be sold, how much for, and how much of the current market could you command? You start small and build up to the result.

What is Serviceable Obtainable Market or SAM?

The SAM refers to the portion of the total addressable market (TAM) that a company or business can realistically target and serve. It represents the market segment that aligns with the company’s resources, capabilities, and competitive positioning. The SAM is determined by considering factors such as geographical scope, customer demographics, and market demand.

In the context of top-down market sizing, the SAM is the result of narrowing down the initial macro view of the market to a segment that the company can effectively target. It represents the potential customers and revenue that the company can realistically obtain within its market segment. The SAM is an essential metric in market research as it helps businesses understand the true size and growth potential of their target market.

What is Total Addressable Market or TAM?

The Total Addressable Market (TAM) represents the entire demand for a specific product or service within a particular market or industry. It is the maximum potential revenue that can be achieved if a company were to capture 100% market share, considering all potential customers and their willingness to purchase.

TAM provides an estimation of the market size and serves as a starting point for market analysis and business planning. It encompasses all potential buyers who have a need for the product or service, regardless of whether they are currently being served by existing competitors or are aware of the product’s existence.

Calculating TAM involves considering various factors such as market demographics, geographic scope, industry trends, and customer behavior. TAM helps businesses understand the market’s overall revenue potential and serves as a benchmark against which to evaluate their market share and growth opportunities.

It’s important to note that TAM represents the theoretical market size and may not be fully reachable or realistic for a company due to constraints such as competition, resources, and market saturation. Nevertheless, TAM serves as a valuable reference point for strategic decision-making, market segmentation, and assessing a company’s growth potential within a specific market.

How to use top-down market sizing

To use top-down market sizing accurately, you should aim to start with a macro view of your market and work towards a micro view.

The first step is to look at industry size estimates to find the largest possible market size for your product. Then, reduce it to a segment that you can realistically target, and then calculate how many potential customers are in that segment.

For example, if you’re selling a payment management system for hair salons in the US, you’d start by calculating the total number of hair salons in the US. Then, reduce that to a smaller segment — how many of those salons have enough customers to justify a payment system? Finally, find out which ones you have already sold to, or which ones are already serviced by competitors and unlikely to buy from you, and so on, to find your serviceable obtainable market.

Here are some tips to do this process as effectively as possible:

  • Use reliable data sources. Some of the data that can help you calculate your market size is available for free or at low cost and can be obtained from analysts like Gartner and the Bureau of Labor Statistics. This can be supported by primary research to give you a rich picture of the market. Spend some time analyzing multiple, reliable sources to come up with an  estimate..
  • Be consistent and clear in your approach. Make sure your calculations are well-documented and rely on the same data.
  • Ask lots of questions throughout the process. Who are our customers? Where are they located? Is the market growing? Aim to get as full and accurate a picture of your market as possible.
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What factors to consider when using market sizing

When deciding which approach to use for market sizing, it’s essential to consider various factors that align with your business, product, and market dynamics. Here are some considerations to help you choose the most suitable approach:

  1. Market maturity: If you are entering an established and well-researched market with ample data available, a top-down approach might be more appropriate. The existing market data can provide a solid foundation for estimating market size and potential customers.
  2. Product uniqueness and disruption: If your product or service is innovative, disruptive, or targets a niche market, a bottom-up approach can be advantageous. This approach allows you to analyze specific customer segments, understand their unique needs, and project adoption rates more accurately.
  3. Available data and resources: Consider the availability and reliability of data sources. Top-down market sizing heavily relies on existing market research and industry reports. If comprehensive data is readily available, a top-down approach can provide a quick estimate. On the other hand, if you have access to internal data, customer insights, or primary research capabilities, a bottom-up approach using your own data can yield more accurate results.
  4. Granularity and specificity: Depending on your business objectives, you may need a more detailed understanding of your target market. In such cases, a bottom-up approach allows for a more granular analysis, enabling you to assess market segments, customer behaviors, and potential adoption rates on a more specific level.
  5. Time and resource constraints: Consider the time and resources you have available for market sizing. Top-down approaches are generally faster, as they rely on existing data and industry research. Bottom-up approaches require more in-depth analysis and data collection, which may be time-consuming. Evaluate the trade-offs between accuracy and the resources you can allocate to the market sizing process.

Ultimately, the choice between top-down and bottom-up approaches depends on your business context, market characteristics, and the level of precision required for decision-making. In some cases, using a combination of both approaches can provide a more comprehensive view of the market size and potential opportunities.

Remember, market sizing is an iterative process, and as your business evolves and gathers more data, you can refine and update your estimates using the most suitable approach for each stage of growth.

The top-down and bottom-up approaches — which one is best?

So, which approach is better? The reality is that each method has its pros and cons. What works extremely well for one business might not work well for yours, and vice versa. Let’s take a look at the advantages and drawbacks of each method.

Top-down market sizing: the pros

  • It tends to be faster than a bottom-up approach..  The process of gathering existing data to estimate your market size isn’t enormously time-consuming, making it .  the best option to get a quick estimate of the serviceable obtainable market, which you can supplement with primary data at a later date to reach a more accurate forecast. .
  • It tends to work well for big, established markets, where there is already plenty of data and existing analysis

Top-down market sizing: the cons

  • It doesn’t work as well for new, smaller markets and disruptive products. If there’s a good chance your product could have a disruptive effect on its market, this could significantly affect serviceable obtainable market and render your top-down analysis largely meaningless.
  • The initial research relies on general information collected by others, so the data isn’t specific to your business and situation. It’s a good general guide, but does need to be supported by primary research that’s specific to your particular market for greater accuracy. 

Bottom-up market sizing: the pros

  • It’s tailored to your specific circumstances and uses your own data 
  • It’s especially useful for new markets and markets where your product is likely to make a big, disruptive impact
  • It tends to result in better forecasting and more accurate data on amore granular level, helping you better understand how your individual projects will make an impact

Bottom-up market sizing: the cons

  • It can take longer and require more resources than a top-down approach, as a bottom-down approach requires much more in-depth analysis of your own business.
  • It has a tendency to assume there will be more customers than there actually will. This is important to look out for.
  • Any errors you make early on at the micro-level become compounded as you work up to the macro-level. It’s important to ensure you’re doing everything the right way, or these mistakes and misunderstandings will carry through your entire analysis.

Examples of Top-down and Bottom-up Market Sizing

To provide a clearer understanding of top-down and bottom-up market sizing, let’s explore some real-world scenarios:

  1. Top-down market sizing example: Imagine you are launching a new line of organic skincare products. To calculate your serviceable obtainable market (SAM) using a top-down approach, you would start with a macro view of the market and narrow it down. Here’s a step-by-step breakdown:
  • Step 1: Begin with industry size estimates: Research industry reports and studies to determine the total skin care market size.
  • Step 2: Identify your target segment: Narrow down the market to a specific segment that aligns with your organic skincare products, such as “organic skincare for sensitive skin.”
  • Step 3: Calculate potential customers: Determine the number of potential customers within your target segment. For instance, you might find that there are 5 million people in your target market based on demographics and consumer behavior analysis.
  • Step 4: Refine the SAM further: Consider factors like geographical location, purchasing power, and competition to determine the portion of the target market that you can realistically capture.

By following this top-down approach, you can estimate the SAM for your organic skincare products and make informed decisions about market entry and potential revenue.

  1. Bottom-up market sizing example: Let’s say you’re a software startup developing a productivity app for freelancers. To perform bottom-up market sizing, you would start with your own product and gradually build up:
  • Step 1: Identify your target audience: Determine the specific segment of freelancers you are targeting, such as graphic designers or copywriters.
  • Step 2: Determine the basic units: Calculate the number of potential customers within your target segment, considering factors like industry reports, freelance platforms, and online communities.
  • Step 3: Assess market penetration: Estimate what percentage of the target market you can realistically capture based on your value proposition, pricing, and competition.
  • Step 4: Calculate revenue potential: Multiply the estimated number of customers by the average revenue per customer to determine your potential revenue within the target market.

By employing a bottom-up approach, you can analyze the granular details of your specific market segment and tailor your strategy accordingly. This approach allows you to make projections based on your own data and assumptions.

These examples showcase how top-down and bottom-up market sizing approaches can be applied in different scenarios. Remember, the choice of approach depends on factors such as market maturity, product uniqueness, available data, and the goals of your business.

Ultimately, it can be useful to use both models in your market sizing. If they both roughly agree, then you can probably assume you have a fairly accurate estimate of your market size. The approach you opt for will also depend to some extent on the type of business you’re building and the product you’re selling.

Regardless of which approach you go with, it’s important to do it right. At Kadence, we have many years of experience helping businesses with their market research, and in sizing the market and we can help you do the same. To find out more, get in touch.

In today’s globally connected world, every product has a potentially vast market. Trying to target everyone in this market with the same materials, approaches, and techniques would be crazy — people are too varied and different to respond to the same marketing message.

So how do you ensure your marketing connects effectively with as many people as possible in your target market? The only real solution is to use market segmentation.

In simple terms, market segmentation is the process of taking a diverse and varied market and dividing it into more homogeneous segments.

Typically you’ll split your market into sub-groups based on criteria like their needs, behaviors and attitudes. . Market segmentation is nothing new, but it delivers a wide range of benefits to businesses if you do it the right way.

In this guide, we’ll take a look at why market segmentation is so important, the benefits it delivers, and how you can do it effectively.

Why do we need it?

Targeting everyone in a broad market with the same message is a fast route to poor response rates and low conversion rates.

Imagine you’re selling a new smartphone. The kind of message that will resonate with a 19-year-old customer is likelyto be very different from the message that resonates with a 74-year-old. Whichever you opt for, you’ll end up alienating a segment of your market.

It’s crucial to split your market into different groups so you can use a more tailored marketing message for each one. This works across all channels, from social media ads to email and direct mail.

What are the benefits of market segmentation?

There are many good reasons to segment your market, such as:

  • Better conversion rates. The ultimate reason to use segmentation is to improve your conversion rates and increase your revenue. By targeting groups with an offering more relevant to them,  you boost your chances of a positive response.
  • It helps you lower acquisition costs by focusing on the most profitable customers. By targeting customers who are easier to sell to and bring on board, you’ll be able to focus your efforts more efficiently and avoid spending lots of resources on tricky customers. This is the approach MetLife took with their segmentation efforts, and it’s strategy we’ve used to great effect with a university looking to secure donations from its alumni. 
  • Create more tailored marketing content. By creating content and ads that are specifically targeted to a certain sub-group of your market, you’ll be able to build a closer relationship with customers. This ensures better retention and stronger connections that, over time, leads to more sales.
  • Better response to marketing campaigns. Email is one area where segmentation can work extremely well. Research by Mailchimp found that segmented campaigns had open rates 14.31% higher than those that didn’t use segmentation.
  • It saves cost. By increasing the accuracy of your marketing, you’ll get more for your money and ensure less is wasted on poorly targeted marketing campaigns
  • Greater personalization. In one report by SmarterHQ, 80% of people who classify themselves as frequent shoppers said they only shop with brands who personalize their experience. By segmenting your market, it’s possible to personalize your messaging and connect more deeply with your target audience.
  • Better service. A good segmentation can help you to provide more effective customer service. Some businesses empower their front of house or call center staff with information as to what segment a customer falls into so that they can tailor their interactions accordingly. 
  • It provides a focus for further market research so that you spend your budget and time on getting to know your most valuable customers

How to do market segmentation

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Before you start segmenting your market, it’s important to know what to aim for. A good market segment should have the following attributes:

  • It’s big enough to be profitable. If your segment is too small, there simply won’t be enough demand for your product or service and you’ll fail to reach your goals.
  • The members of your market are similar enough to respond to one message. This is the main reason to segment — is your sub-group homogenous enough for the same marketing strategies to be relevant and effective?
  • It’s future-proofed. Will your segment stand the test of  time?
  • It’s distinct. The segment is memorable and easy to distinguish from other segments.

What categories should you segment your market into?

When it comes to deciding on the criteria for your segments, there are a number of options. Let’s take a look at some of the main types of market segmentation and the benefits and drawbacks of each.

  • Demographic segmentation. This involves using criteria like age, gender or income level to segment your customer base.. It’s one of the easiest ways to quickly start dividing up your market, but it is a very simplistic and outdated approach to segmentation. As Mark Ritson rightly argues “millenials are not a segment”. Assuming that everyone of a certain age has the same needs and attitudes and behaves in the same way is misguided and has resulted in some well-known marketing fails. Take Joon, Air France’s sub-brand for millennial travelers. Rooted in stereotypes, the brand alienated its target customers and crashed and burned. 
  • Geographic segmentation. Similar to demographic segmentation, segmenting your customers based on where they live can leave you in hot water. Assuming that all consumers are the same just because they live in the same place is reductionist and is unlikely to be effective as a segmentation strategy.
  • Behavioral segmentation. This type of segmentation is based on how customers have responded or behaved in the past in their interactions with your brand. It’ll help you understand your most profitable customers and what to sell to them but the drawback is in the name. This type of segmentation only tells you how customers have behaved in the past. As such, it’s a poor predictor of future behavior, and it doesn’t provide any insights around motivations, values or needs which can help you connect with consumers on a deeper level. 
  • Psychographic segmentation. This segments customers based on their views, values and lifestyles. s . It makes it easier to create a more resonant and relatable marketing message and avoid alienating your market with views they won’t agree with.
  • Needs-based segmentation. This is by far and away the most effective approach to segmentation. Segmenting people with similar needs allows you to be more targeted in product and service design or marketing campaign development, as you can focus on addressing customer needs and pain points. What’s more needs-based segmentations tend to be more long lasting and future-proofed than other approaches. 

Market segmentation is a great way to ensure you’re targeting the right customers  and tailoring your interactions for maximum success.

It allows you to forge a deeper bond with your audience. and whilst, it requires more work than a one-size-fits-all message, it’s well worth it in terms of the results.

At Kadence International, we help our clients design effective market segmentation studies and do it in a way that maximizes revenue. To find out how we can do this for you, get in touch.

In the world of market research, we can only get so far by relying on hard, numerical data.

Hard metrics (generated from quantitative research) are extremely useful and should form a core part of any business strategy. But they only tell part of the overall story.

To dig deeper and gain a fuller picture of why our customers behave the way they do, it’s important to consider supplementing quantitative research with a more qualitative approach. Qualitative research is based on conversational and open-ended communication and aims to dive a little deeper than quantitative metrics and explore the why behind customers’ actions.

If you want to get the most out of your research, you should be using both approaches. In this guide, we’ll take a look at what qualitative research is, what makes it so useful, and how you can employ it in your own work.

How is qualitative research different from quantitative research?

Quantitative research:

  • It is more data-based, relying on hard data points and objective measurements.
  • It uses statistics and numerical data to identify trends and patterns.
  • It allows you to quickly establish what’s happening and look at possible causes. 

Quantitative studies are extremely valuable. They allow us to gain a reliable, accurate understanding of what’s happening in our market and amongst our customers and make clear-headed decisions that influence the bigger picture. But quantitative data alone isn’t enough.

Qualitative research is more human-focused. It’s less concerned with numbers and figures and more focused on what customers have to say. It can take the form of interviews, focus groups or online communities, and its goal is to dig into the more intangible and subjective reasons why customers behave the way they do.

Why is qualitative research useful?

Qualitative research is useful because it helps us dive into the human factors driving our customers’ actions. People are complex and often unpredictable, and our behavior can’t really be boiled down into a series of metrics.

For example, we might know that sales for one product are outperforming another. But why is this happening? Our hard metrics can show us the overall trend and might allow us to pinpoint certain glaring patterns, but they don’t tell us what’s going on in our customers’ minds.

For this, we need qualitative studies. We need to gain insight into the microtrends that lie beneath bigger patterns. 

The benefits don’t end there, though. Qualitative research means getting to know your customers and their motivations better. Here’s how that helps:

  • It can help you to understand customer needs, generating new ideas for products and services. 
  • It can provide valuable feedback on your existing offering. Using qualitative research, you can explore pain points and barriers to use, helping you understand how to improve your current products and services.
  • It can be a useful input to your marketing. By truly understanding your audience, you can take a more personalized approach, speaking their language and talking to your customers in a way they can really relate to. It can also provide useful input to campaign or content development. By understanding customer needs, you can create marketing content that solves specific problems for your audience and delivers real value in response to the challenges they face and the pain points they grapple with.
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Qualitative research methods 

Qualitative research is made up of a range of different methods and techniques. Each has its own use cases, and the best approaches will combine several methodologies based on your customers and your goals. Here are some of the main methods:

Qualitative research methods are approaches and techniques used to gather and analyze non-numerical data to understand human behavior, experiences, and social phenomena deeply. Unlike quantitative research, which focuses on numerical data and statistical analysis, the qualitative study seeks to explore and interpret the meanings, patterns, and complexities of human experiences.

Qualitative research methods are characterized by their flexibility, contextuality, and emphasis on subjective interpretations. They are suitable for studying social and cultural phenomena and individual perspectives and exploring new or complex research areas. Here are some commonly used qualitative research methods:

  • Focus groups. This is where you bring a small number of customers (usually less than 15) together in a group to discuss a particular issue. By tapping into the power of group dynamics, we’re able to uncover rich insights around attitudes and behaviors, and explore underlying motivations, need states and perceptions.
  • One-to-one, in-depth interviews. Here, researchers speak to customers directly in a one-to-one setting. It’s a good way to get truly in-depth on a topic, delving into the participant’s opinions and gaining valuable feedback and insight. In-depth interviews can be carried in person, on the phone or online. 
  • Expert interviews. Like in-depth interviews, expert interviews involve speaking to industry experts to build a rich understanding of the market and its direction. This approach can help you explore the impact of emerging trends to help future-proof your business.
  • Ethnography. This is where researchers immerse themselves in customers’ worlds to understand more about their day-to-day lives and the role of brands and products. Ethnography can take different forms, from visiting consumers and accompanying them as they go about their day to mobile self-ethnography, where consumers complete video tasks to show us how they live. 
  • Online communities. This is where groups of consumers are brought together over a series of days on an online platform to explore specific issues. Consumers then complete individual or group tasks, enabling the researcher to uncover rich insights. Like mobile self-ethnography, online communities can involve photo and video tasks and are a great way of bringing an audience to life for key stakeholders. What’s more, as online communities consumers over a longer time period than an in-depth interview or a focus group, they allow you to explore complex or sensitive issues and uncover deep insights into attitudes and values to inform your decision-making.

Traditionally qualitative research was done according to the grounded theory method. This is a framework for research that involves collecting qualitative data through the above methods and then using that data to form a theory or hypothesis. However, it’s easy to underestimate the sheer amount of data you can collect through qualitative research and this is particularly true of online methods such as online communities. As such, using the grounded theory method is often not feasible. At Kadence we take a different and more structured approach, exploring hypotheses with key stakeholders and designing the research so that we can test these. This means that the research is tightly focused on the areas that matter most to stakeholders, ensuring that the insights we uncover are actionable.  

These methods often employ thematic analysis, constant comparative analysis, and coding to organize and interpret data. The data collected in qualitative research can be rich, nuanced, and context-specific, providing deep insights into human behavior, motivations, and social phenomena. Qualitative research is frequently used in disciplines such as sociology, anthropology, psychology, education, and marketing, where understanding the subjective experiences and meanings attributed to phenomena is essential.

Some examples of qualitative research questions you might ask:

  • How important is corporate responsibility to our customers?
  • What are the main reasons people use social media?
  • Why do people want to work for our organization?
  • How do adult males feel about hair loss?
  • What are the key motivations for undertaking a weight loss program?

Qualitative research is essential if you want to truly understand your customers and improve your product or service to deliver what they want and need. It goes hand in hand with more quantitative methods of research and helps add context, explanation, and depth to the more numerical and data-based metrics.

At Kadence, we can help you get the most out of qualitative research better to understand your customers and market on all levels. To find out how to get in touch with us.

Marketing textbooks are filled with examples of products or services that flopped when they hit the market.

Take Juicero, for instance. Investors pumped a staggering $120 million into a Wi-Fi-connected juice maker that nobody indicated they wanted or needed. Unsurprisingly, it was scrapped within two years.

Or consider ESPN’s mobile phone service, priced at $400 and lacking handset choice for the target audience. The service was swiftly shut down, and ESPN opted to provide content to Verizon instead.

And who could forget New Coke? Launched in 1985, it remains a major marketing misstep. After only a few weeks, Coca-Cola abandoned the product and reverted to its old formula.

Even some of the world’s most innovative companies have failed to foresee the impact of new launches on their target market. Google, for example, arguably launched its wearable Google Glass concept too soon. Its high price did not help, and it failed to connect with consumers.

Fortunately, there is a way to avoid such failures. By conducting product concept testing before a product launch, businesses can develop their ideas in a safe and controlled space with the target audience.

What is Concept Testing?

Concept testing involves presenting potential product concepts or ideas to a target audience and collecting feedback to assess market potential. The concept can be a new set of product ideas, a redesign, or a rebrand.

Testing methods can be online, such as quantitative surveys or online communities focused on qualitative insights, or face-to-face, such as focus groups or in-depth interviews.

The Role of UX Designers

UX designers play a crucial role in concept testing by employing user-centered design principles. They create interactive prototypes that simulate the user experience, allowing participants to engage with and provide feedback on proposed concepts. UX designers ensure that concepts are intuitive, usable, and aligned with the target audience’s needs. They facilitate user testing sessions, observe interactions, and gather valuable insights to refine the concepts.

The Importance of Concept Testing

Here are the five key reasons why concept testing is so important:

1. Concept Testing Helps Filter Ideas

Concept testing helps you move beyond blue-sky thinking and determine which ideas will be a hit. It provides data that can bring the whole team on board by providing consensus on which projects to develop and which to shelve.

Great concept testing unites teams behind ideas with real potential, eliminating the need for office politics or frustrating ‘design by committee.’ With concept testing, you hear directly from consumers about what will work and what won’t.

Using a range of qualitative and quantitative techniques, you can understand the consumer view of different concepts and explore whether the types of products or services you want to develop will resonate. Employing a range of testing tools enables you to identify the product concepts with the highest appeal and understand how these can be refined. This allows you to move to the next stage of development with confidence.

It’s no overstatement to say that a well-designed, concept-testing survey or a skillfully moderated online community can pave the way to success. But any survey template or discussion guide needs to be designed to ensure that the overall package, as well as individual features or attributes, are each assessed and fed back on.

This is something that needs to happen in the early stages of decision-making, too. It cannot be left too late as concept testing aims to help you iterate your ideas and tweak them ahead of launch so that they are primed for success.

2. Concept Testing Prevents Bad Decision-Making

Testing concepts in detail before launch may seem like it delays your go-to-market strategy, but it saves significant time and financial losses in the long run. Failed products or services are costly, but concept testing helps you avoid bad ideas and uncover those with untapped potential.

Concept testing helps you find the strongest option to take forward or improve underperforming concepts, ensuring your plans have a solid chance of success. In this way, concept testing can help you avoid an embarrassing failure and take your product development processes from good to great, thanks to that all-important feedback from those who matter – your customers.

3. Concept Testing Identifies Key Elements

Even if you gauge that your product ideas will fly, there are additional considerations, such as positioning, packaging, branding, and pricing. Concept testing optimizes your innovation, reducing the risk of project failure and limiting excessive costs.

Concept testing is crucial for product developers to determine the innovation’s chance of success. It can shed light on blind spots, inefficiencies, misinterpretations, or problems that can lead to failure. Using concept testing methods like surveys as well as qualitative research via a focus group, in-depth interview, or online community can all help to tease out your target audience’s wants or needs.

4. Concept Testing Fixes Problems Early

The sooner concept testing is undertaken, the more flexibility you have to optimize your initial idea. Concept testing helps you understand what elements don’t work, allowing you to refine ideas swiftly based on consumer feedback.

Through concept testing, you can understand what elements don’t fly with customers so you can ditch underperforming elements to save costs or iteratively improve concepts so that they better meet consumer needs. With an online community, for instance, it’s possible to develop concepts based on consumer feedback and then upload them for further feedback, in this way allowing you to refine ideas swiftly.

5. Concept Testing Ensures Market Fit

Concept testing puts the consumer voice at the heart of product development, ensuring new products resonate with customers and increase business performance. It helps you identify pain points or delights relating to new ideas, establish how your product fits into the lives of your target audience, and determine which concepts they would be willing to pay for.

Good concept testing means getting under the skin of your customer and letting their feelings and needs guide you toward the solutions with the most potential. By putting consumers central to product development, you can develop products and services that outperform the competition.

Conclusion

Concept testing is a crucial step in the product development process, providing valuable insights and feedback from the target audience. It helps businesses refine their concepts, build better products, and increase their chances of market success. By partnering with skilled market researchers, you can gain the insights needed to focus efforts in product development and outperform the competition.

Concept testing is a critical market research method that allows businesses to gather feedback and validate their ideas before investing significant resources into product development. It involves presenting potential product concepts or ideas to a target audience and collecting their feedback to assess market potential and make informed decisions.

By conducting concept testing, businesses can identify and address potential issues or shortcomings in their product concepts early on. This process helps refine and optimize the product’s features, design, and overall value proposition. It enables brands to gather valuable insights into consumer preferences, needs, and expectations, allowing them to align their product development efforts with market demand.

The feedback gathered during concept testing provides actionable data for designers and product teams to improve their concepts iteratively. By incorporating user insights, businesses can make informed decisions about product features, functionality, usability, and overall user experience. This iterative approach ensures that the final product aligns with user needs, expectations, and preferences, increasing the likelihood of market success.

Moreover, concept testing helps in minimizing the risks associated with product development. By validating concepts early on, businesses can avoid costly mistakes and reduce the probability of launching a product that fails to resonate with the target market. It allows companies to make data-driven decisions, optimize resources, and ultimately build better products that are more likely to succeed in the marketplace.

Concept testing plays a pivotal role in the product development process by providing valuable insights and feedback from the target audience. By leveraging this feedback, businesses can refine their concepts, build better products, and increase their chances of delivering solutions that meet customer needs and expectations. This iterative and user-centered approach enhances the overall product quality and increases the likelihood of market acceptance and success.

Product development need never be a risk. If you’d like our support with a concept testing project, please get in touch or request a proposal.

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Before they reach the target market, products or services always start off as unproven ideas. But in order to avoid costly failures, businesses need to understand whether or not they’ll be a hit with consumers.

Concept testing is the process of using qualitative or quantitative research in order to test your ideas ahead of launch. It enables you to ascertain which features are likely to be popular with the target audience and which may need changing. 

Key methodologies and testing methods can include in-depth interviews, online communities and the use of a testing survey to gather feedback on your potential product.

Paving the way to success

Testing product ideas with your target audience enables you to optimize your approach before introducing products to the market, helping you to get features right from the earliest stage and dramatically boosting your chances of success by asking potential customers what they think. It can also prevent costly failures, so an investment in effective concept testing is worthwhile.

After all, seemingly minor product features can have a fundamental effect. In this way, market research enables you to find out what potential customers care about in order to determine which attributes should be incorporated into the final design ahead of the official product launch.

Product and concept development

Behind almost every successful product is a careful research and development phase – and we’ve worked with some of the biggest brands to take their big ideas and turn them into products consumers love through concept and product testing.

But how do you test a product concept effectively?

Here are five examples of how to test product concepts for any potential product.

1. Run an online survey to test overall concept appeal and to narrow down your options

A concept test survey can be a powerful tool. A testing survey can reach large audiences of carefully targeted consumers, providing rich data to be analyzed. It is possible to test a number of concepts in order to understand their appeal and to help you decide which concepts to take forward for further testing.

Product developers know that the use of effective survey questions is a proven way of generating relevant information on which to base future decisions. Questionnaires are typically used for obtaining valuable data. For example, to ascertain how many potential customers there are, whether they would find such a product or service useful, and the sort of price they would be willing to pay. 

The key is to ask the right people the right questions, and to ask enough people to get meaningful results. Often a Likert scale is used, a type of scale used to rate various features or attributes in the eyes of end users. Do bear in mind, too, that you need to approach a significant sample of people who match the profile of your target audience when sending out questionnaires.

Effective concept testing can also give you relevant information and clear pointers as to which demographic groups, geographies or market segments will get as excited about your idea as you are.

2. Employ conjoint analysis to understand which features really matter to consumers

As well as asking potential customers which concept they prefer, you can use techniques like conjoint analysis to gauge which product features are most important. This is a technique which involves presenting people with a series of attributes and asking them to rank them in order of appeal.

Conjoint analysis is regarded as an effective way of gaining detailed insights. Essentially, it’s a way of measuring the value that customers place on a product’s specific features. It typically works via a survey, in which participants are shown a combination of attributes and asked to compare or rank them. It can help measure and understand customer preferences for particular features to generate actionable insights to guide product development.

Whilst the process involves offering respondents a range of choices. It’s important, however, not to overload respondents so that they remain fully engaged with the process.


This approach can help you identify the features that matter to consumers. Use this to categorize features into ‘need-to-have’ versus ‘nice-to-have’. Consider which features and functionality your product really needs in order to be compelling to the target market to prioritize your investment.

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3. Use qualitative methodologies to hone your ideas along with the target audience

Group discussions are a tried and tested way of getting rich qualitative input. We can bring groups of potential customers together – face-to-face in a focus group or in an online community – and conduct a carefully guided discussion, often with prototypes or other stimuli to spark conversation. This allows us to drill down into the product features that consumers really want or need. Qualitative research can also reveal unmet needs, inspiring further development and ensuring your product or service has the edge over the competition.  

 
In some cases, qualitative feedback can be gained by conducting one-on-one in-depth interviews. This is particularly useful if you have a detailed or complicated concept that’s targeted at a niche B2B audience.

It’s important to use open-ended questions to gather insights: Ask respondents what they like and dislike and give them the space to explain their views. This provides the opportunity to get objective feedback from your target audience without restrictions or bias and to obtain detailed and actionable feedback. 


Questions can include, for instance, ‘How appealing are following the features?’ or ‘Which of the following attributes are most important to you?’ or ‘How well do these statements describe the product?’ 


Choosing the right questions, moderating the discussion, probing at the right intervals and keeping respondents engaged is key to successful product concept testing. With so many products failing, testing your concept early is also vital. By testing product concepts thoroughly and early, you’ll know which concepts are likely to drive revenue before you have invested too much time and effort in development.

4. Embrace an agile and iterative testing approach

Another way to test product concepts is to develop an agile and iterative testing approach. Online methodologies like online communities lend themselves well to this, as it’s possible to test concepts, gain feedback, adapt the concepts based upon this and then retest them with consumers.

An online community is an online research platform where consumers are brought together to take part in a series of tasks. The discussion is curated by our team of researchers in order to gain in-depth feedback, which will enable effective concept iteration.

The online community platforms we use have built-in features for concept testing. For example, it’s possible to mark up images to highlight which aspects you like or dislike, adding detailed commentary. The results of this exercise can be analyzed, and the concept iterated accordingly, with the new and improved idea put back into the community for further feedback and testing. The result? By harnessing feedback loops to refine and retest, you’re able to develop the strongest concept possible. 

Even after your product has launched, there’s real value in continuing to gain feedback. Once your product is in consumers’ hands, there’s more to learn about the role it plays in people’s lives and any unforeseen pain points that could require further changes to address. Be ready to test your product concept to ensure it gets better and better. By honing and refining your product features, you can stay ahead of the competition. So always refine and iterate. Successful product innovation is never finished. The beauty of product concept testing is that you have the luxury of being able to respond to feedback until you hit on the optimum prototype. 

5. Harness new technology to bring ideas to life for consumers 

To get the most out of respondents during a piece of concept testing research, it’s important that you bring concepts to life by creating stimuli that enable the target market to picture your proposed products or services. With our own design team in-house we can take your initial ideas and turn them into beautiful mock-ups that ensure the core idea is clear.

To take this a step further, we are currently exploring how to use augmented reality (AR) to bring concepts to life, thereby eliciting higher-quality insights. Through AR, we can create 3D digital prototypes that consumers can place in real environments using their phones. Not only do immersive methods like this deliver richer insights, but they also allow you to test ideas in context.

Get under the skin of your potential customers in this way and let their feelings and needs guide you towards the solutions with the most potential. The results will speak for themselves.

To find out more, please visit our concept testing services page or request a proposal from our team. 

What is a Central Location Test (CLT)?

Central Location Testing (CLT) is a market research method where participants are invited to a specific location to evaluate products, services, or concepts. This controlled environment allows researchers to gather in-depth insights into consumer preferences and behaviors.

Why Use Central Location Testing?

Central Location Testing is valuable for several reasons:

  • Controlled Environment: Ensures consistency and reliability in testing conditions.
  • Immediate Feedback: Provides real-time insights from participants.
  • Complex Testing Scenarios: Ideal for detailed observation or interaction, such as taste tests and usability studies.

How Does Central Location Testing Work?

Recruitment

Participants are carefully selected based on specific criteria to represent the target audience.

Venue Selection

Choosing an accessible, comfortable, and well-equipped venue is crucial. Examples include conference rooms, shopping malls, or specialized research facilities.

Test Design

Tests are designed to gather specific data points, such as preferences and behaviors, using methods like surveys, focus groups, or observational studies.

Data Collection

Researchers use questionnaires, interviews, and direct observation to collect data.

Analysis

Collected data is analyzed to identify trends and insights that inform business decisions.

Types of Central Location Testing

There are several types of Central Location Testing, each suited to different research needs:

  • Product Testing: Evaluates physical products for taste, texture, appearance, and usability.
  • Concept Testing: Assesses consumer responses to new ideas, advertising campaigns, or product concepts.
  • Usability Testing: Focuses on the ease of use and functionality of products, websites, or software.
  • Sensory Testing: Used in the food and beverage industry to assess taste, smell, and texture.

Benefits of Central Location Testing

  • Detailed Insights: Provides in-depth understanding of consumer preferences and perceptions.
  • Improved Accuracy: Ensures consistent and reliable results in a controlled environment.
  • Cost-Effective: Centralizes the testing process, often reducing costs.
  • Flexibility: Suitable for a wide range of products and testing scenarios.
  • High Engagement: Participants are more focused and engaged.

Best Venues for Central Location Testing

Selecting the right venue is critical:

  • Accessibility: Ensure the location is easily accessible.
  • Comfort: A comfortable environment leads to more accurate feedback.
  • Facilities: The venue should have necessary facilities like seating, lighting, and audio-visual equipment.

How to Conduct a Successful Central Location Test

  1. Define Objectives: Clearly outline the goals of the test.
  2. Select Participants: Choose a representative sample of your target audience.
  3. Choose the Venue: Select a location that meets your test requirements.
  4. Design the Test: Develop a detailed test plan.
  5. Conduct the Test: Execute the test consistently.
  6. Analyze the Data: Extract meaningful insights from the data.
  7. Take Action: Use the insights to make informed business decisions.

Central Location Testing is a powerful tool in market research, providing valuable insights into consumer preferences and behaviors. By conducting tests in a controlled environment, researchers gather accurate and reliable data to inform product development, marketing strategies, and business decisions. Whether testing a new product, evaluating a concept, or conducting a usability study, CLT can help you gain the insights needed to succeed.
To find out how Kadence can help you leverage Central Location Testing for your business, reach out to request a proposal.
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What is Concept Testing?

Concept testing is the process of getting your target audience to evaluate or give feedback on an idea before it is released to the public. This method can be applied to a variety of areas, including adverts, physical products, websites, landing pages, and more. By gathering consumer insights early on, businesses can refine their concepts to better meet market demands.

Why Use Concept Testing?

Here are some of the main reasons why businesses should use concept testing:

Evaluate Ideas Early: Concept testing allows you to evaluate ideas early in the development process and make necessary tweaks before launching to a broader audience.

Company Buy-in: It helps your team gain company buy-in for new ideas by providing empirical data that justifies decisions.

Cost Savings: Concept testing can be a significant money saver. Research shows it is 100 times more expensive to fix an error after development than during the testing phase.

For these reasons and more, companies leverage concept testing to ensure their ideas are viable in the real world before investing significant resources. In this article, we’ll take a deeper dive into concept testing and its various facets, including how to conduct it effectively.

Benefits of Concept Testing

Brands that use concept testing often cite the following benefits:

  • Consumer Insights: Provides valuable insights into consumer preferences and perceptions, aiding in the development of products that align with market needs.
  • Demand Identification: Helps identify potential demand for a new product or service, reducing the risk of launching unsuccessful products.
  • Risk Reduction: Significantly reduces the risk of product or campaign failure by validating concepts before large-scale investment.
  • Concept Validation: Validates the viability and relevance of a concept, ensuring it resonates with the target audience.
  • Refinement: Facilitates the refinement and optimization of product features, messaging, and positioning based on consumer feedback.
  • Early Issue Detection: Identifies potential issues or barriers to adoption early in the process, allowing for timely adjustments.
  • Data-Driven Decisions: Enhances decision-making through data-driven insights, leading to more strategic and informed choices.
  • Target Audience Segmentation: Helps identify target audience segments and their specific preferences, allowing for more personalized marketing efforts.
  • Competitive Advantage: Provides a competitive edge by understanding customer needs and wants better than competitors.
  • Successful Launches: Increases the likelihood of successful product launches and marketing campaigns by aligning them with consumer expectations.
  • Resource Efficiency: Saves time and resources by avoiding costly mistakes and failures through early validation.
  • Customer Trust: Builds customer trust and loyalty by delivering products that meet their expectations.
  • Iterative Improvement: Supports iterative development and continuous improvement based on ongoing feedback.
  • Effective Marketing: Enhances marketing strategies by aligning them with consumer preferences and expectations.
  • Communication Foundation: Provides a solid foundation for developing effective communication and promotional materials.

How Does Concept Testing Work?

Concept testing can take various forms depending on what you want to test. Generally, the process involves asking current or target customers to engage with your concept and provide feedback, either in person (e.g., in a focus group) or online (e.g., in an online community or survey).

One of the most popular and effective ways of testing concepts is through an online survey. In this section, we’ll focus on our top tips for conducting successful concept testing via online surveys.

How to Approach Concept Testing Through an Online Survey

Set a Clear Goal at the Outset: Before beginning, it’s crucial to set a clear goal for your test. This helps provide structure and direction to the survey. Ask yourself and your team questions like:

  • Why are you conducting this test?
  • What actions will you take based on the results?
  • How does this test fit into your overall strategy?

The answers to these questions will help you select your testing population, choose the right metrics, and conduct a more effective survey.

Pick the Right Metrics to Track: The metrics you choose can significantly impact the usefulness of your survey. Examples of important metrics include:

  • Purchase Intent: How likely would participants be to purchase the product?
  • Innovativeness: How innovative do consumers find the concept?

These metrics will form the basis of your questions and shape your survey. Questions should focus on likes and dislikes, overall appeal, uniqueness, and innovativeness.

Give Your Survey a Clear Structure: Ensure your survey has a coherent structure, with similar questions grouped together. This helps prevent confusion and frustration among participants. Including an introduction section that outlines what respondents should expect and provides clear instructions can also be beneficial.

Concept Testing Survey Methods

There are two main types of concept testing survey designs: monadic and sequential.

  • Single-Concept (Monadic) Design: Participants analyze one concept, learn its features, and provide feedback. This method provides in-depth responses but can be time-consuming and expensive.
  • Multi-Concept (Sequential) Design: Participants analyze multiple concepts in succession, providing feedback for each. This method saves time and money but may lead to lower-quality responses due to participant fatigue. To mitigate this, randomize the order of concept presentation to avoid bias.

How Long Should a Concept Testing Survey Be?

Opinions vary on the ideal survey length, but generally, it should not exceed 20-25 minutes to avoid “survey fatigue.” We recommend keeping it under 30 questions, focusing on quality rather than quantity.

Ask Screener and Demographic Questions

Screener Questions: Used at the beginning to filter out unqualified participants. For example, if testing an online payment service, a screener question might be, “How often do you shop online?”

Demographic Questions: Placed at the end to gather information about respondents, such as age or profession. This ensures the survey is representative and allows for response analysis based on demographic factors.

Send the Survey Out

Once the survey is ready, select a sample that represents your target population and distribute the survey.

Analysis and Action

The final and most crucial step is to analyze the survey results and take action based on the findings. Use metrics like Likert scores to compare responses across concepts or attributes. Ensure any conclusions are statistically significant before making decisions.

Share the results with stakeholders clearly and in detail to support product launches, gain buy-in, or fuel further R&D.

Concept testing provides hard data to support concept validation, helping businesses make informed decisions and create products that delight customers and drive growth.

To find out how Kadence can help you harness the power of concept testing — and take a more data-driven approach to your organization in general — reach out to request a proposal.

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Survey design is an important part of doing business and market research. Put simply; it refers to the process of creating surveys that get responses.

This is important because it allows you to better understand the market and your customers, so you can make more data-driven decisions and fix areas that are falling short. Done right, a good survey can be the driving force for huge positive change.

How to design a survey

Planning

The first stage of survey design is all about planning. This is where you’ll decide what you want to focus on, why you’re running a survey at all, who you want to target, and more.

If you don’t get this stage right, you’ll end up with a survey that doesn’t have any clear goals or fails to achieve its objectives. To get meaningful feedback from a survey, you must be clear about what you’re trying to achieve.

This initial stage is extremely important and is not something to skim over or rush through. In fact, the planning stage should take up a large chunk of the overall process.

1. Figure out your goals

The goal of the survey is what gives it structure and influence every part of the process. Here are some examples of goals for surveys:

  • Find out what customers think about your brand versus the competition 
  • Assess the main challenges faced by customers in your industry
  • Learn what customers like the most and least about a specific product.

Goals should typically be narrow enough that there is no risk of confusing your stakeholders or your respondents. Narrow goals also avoid overwhelming your respondents with questions.

A clearly defined goal helps the team draw inspiration and stay united and focused. Once you have decided on a goal, you’ll have a much better idea of what type of questions to ask, the type of respondents you want to reach, and so on.

In other words, you need to set a goal in order for the rest of the process to click into place.

2. Decide who you want to target with your survey

The next stage of the planning process involves deciding who will actually take part in your survey. 

This is called the target population, and it should reflect the goal. For example, if you’re asking how your product impacts a person’s job, it’s probably not a good idea to target people under 16 or people over 70 as they are unlikely to be working.

3. Choose the right sample

The target population you choose will often be too large to effectively survey. This means you’ll have to select a sample — a smaller group that represents the larger demographic. You can then take these results and extrapolate them to the wider population.

Done right, this group will be representative enough to act as a miniature version of the whole. Sampling allows you to achieve your goals with a fraction of the cost, time, and resources required to survey the entire target population, which in most cases, would simply not be possible.

4. Pick the right survey method

This stage of the planning process will be driven by your goal and your target demographic. Some examples of different methods include:

Every method has its pros and cons. Online surveys enable you to reach a large number of people quickly, but they’re less appropriate if you’ve got a physical product you want people to interact with. Instead, a central location test might be more appropriate in this instance.

Every survey is different. If your target population is mostly people over the age of 65 or in geographical locations where internet access is not widespread, online surveys will probably not be the best method. Likewise, a central location test might not work well if your target demographic is very busy.

Once you have decided on a goal, established a target population and a sample, and chosen the method for your survey, it’s time to get down to actually creating it.

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Creating your survey

Creating your survey is all about making it as easy as possible for your respondents to read, understand, and answer. If you overwhelm them with information and confusing formats, they’ll quickly give up and you’ll end up with fewer answers and a smaller pool of data at the end.

Here are some ways to make your survey as effective as possible:

How to write effective survey questions

Writing good survey questions is essential to gather accurate and meaningful data. You need to ask enough to gather a good amount of information, but if you use too many, you risk driving your respondents away.

It’s always best to start with a clear introduction that introduces the survey, explains the format, and addresses any initial questions the reader might have. You might then start with some screener questions (about age or job title, for example) to filter out any respondents who don’t match the target demographic.

Here are some guidelines to help you write effective survey questions:

  1. Define your objectives: Identify the purpose of your survey and the specific information you want to gather. This will help you frame your questions appropriately.
  2. Keep it concise: Make your questions clear, concise, and concise. Avoid using complex or technical language that may confuse respondents. Use straightforward language.
  3. Avoid leading questions: Avoid questions that suggest a particular answer or influence respondents’ opinions. Use neutral language and focus on gathering unbiased responses.
  4. Use closed-ended and open-ended questions: Closed-ended questions offer respondents predefined answer choices (e.g., multiple-choice, Likert scale), making it easier to analyze the data quantitatively. Open-ended questions allow respondents to provide detailed and personal responses, offering qualitative insights.
  5. Use a mix of question types: A variety of question types can keep the survey engaging and provide different perspectives on the topic. Mix multiple-choice, rating scales, ranking, and open-ended questions to gather diverse data.
  6. Avoid double-barreled questions: Double-barreled questions simultaneously ask about two different things, confusing respondents and leading to inaccurate responses. Instead, ask separate questions to address each aspect.
  7. Order questions logically: Arrange your questions in a logical flow that makes sense to respondents. Start with easy, non-sensitive questions to build rapport and then move to more complex or personal questions.
  8. Pilot test your survey: Before launching your survey, conduct a pilot test with a small group of respondents to check for clarity, relevance, and potential issues. Make necessary revisions based on their feedback.
  9. Offer response options that cover all possibilities: Ensure that the response options for closed-ended questions cover all possible answers. Include an “Other” or “Not applicable” option if necessary.
  10. Avoid jargon and technical terms: Use language familiar to your target audience. Avoid industry-specific jargon or technical terms that may confuse respondents.
  11. Use scales consistently: If you use rating scales or Likert scales, ensure that the response options and scale labels are consistent throughout the survey. Clearly define the meaning of each point on the scale.
  12. Consider the order bias: The order of questions can influence responses. Be mindful of this bias and consider randomizing the order of answer options or questions to minimize its impact.
  13. Test for survey length: Long surveys can lead to respondent fatigue and higher dropout rates. Keep your survey as concise as possible while still capturing the necessary data.
  14. Offer anonymity and confidentiality: Assure respondents that their responses will remain anonymous and confidential. This encourages honest and accurate answers, especially for sensitive topics.
  15. Review and revise: Proofread your survey questions for clarity, grammar, and spelling errors. Take the time to review and revise the questions to ensure they accurately reflect your objectives.

Following these guidelines, you can create well-crafted survey questions that generate reliable and meaningful data for your research or analysis.

Executing the survey

Once the survey is planned and created, it’s time to implement it. If you have done the earlier stages correctly, this part should run smoothly. However, in practice, errors and unexpected setbacks are common. Here’s how to execute your survey in the best way possible:

Work with trained researchers

If your survey will be carried out in person or on the telephone, it’s important that your staff know how to write survey questions. Ensure you’re working with a team trained to ask open-ended questions correctly in a way that avoids confusion or tempts bias.

Pilot surveys

A common practice is to conduct a smaller pilot survey before the main one, which can help identify any problems with the survey and give you an opportunity to make some tweaks before sending it to the full sample group.

Avoiding bias

One of the main challenges when conducting surveys is bias. It’s easy to accidentally lead your respondents down a certain path and encourage them to answer in a certain way, which you must avoid in order to get accurate and valuable results. To minimize bias:

  • Avoid leading questions like comparisons with other companies or products
  • Keep questions as precise and simple as possible to eliminate the risk of misunderstanding
  • Try to predict inherent biases in your target group and work to mitigate them

Analyzing and sharing results

After the survey is complete, the final steps are to analyze and share the results. This is an extremely important step, as this is where you put into practice what you learned and draw value from the survey.

It’s important to categorize and analyze the results properly. This process might be as simple as collecting the results in an Excel spreadsheet, or it might be much more detailed, using a range of advanced analysis techniques..

Think about how the survey relates to your overall business and marketing and how you can act on the insights you gained and use them to achieve your goals.

Create a summary report

A summary survey report is a great way to share your results with your stakeholders in the business. It’s a document that breaks down what your survey set out to achieve and the key findings. We regularly create summary reports, as well as longer, more detailed reports for our clients. 

Make sure to clearly show what your aims were and what you learned, and present this in a way that anyone – regardless of market research literacy – can get to grips with. It’s worth working with a good designer to present the findings in the best way possible. At Kadence, we have our own design team who help us to create impactful reports that make data easy to understand and act upon.

Survey design can seem like a challenging process, and it does require input and collaboration from many parts of the company.

However, the rewards are worth it. A well-designed survey can provide a much more intimate understanding of your customer base and how your products and services are received. It can yield incredibly valuable feedback and prompt much-needed change.

To find out how Kadence can help your organization plan more effective surveys and harness data for maximum effect, reach out to request a proposal.

Conjoint analysis is often lauded as an extremely effective way to gain detailed insights and conduct market research, but how does it work?

Essentially, conjoint analysis is a method of measuring the value that customers place on different features of an existing or new product. It typically works via a survey, which looks something like this:

Participants are shown a combination of features (called attributes) for a product. If the product is a smartphone, for example, they might be shown the price, memory size, screen resolution, and camera quality. They’re then asked to compare different attributes. For example, what would they choose between a $150 phone and a $250 phone? Do they prefer 32GB of memory or 64GB? There are several ways to structure this, as we’ll find out. After the answers have been collected, we analyze the results to inform the right marketing decisions.

Conjoint analysis is a powerful market research method used to analyze and understand customer preferences. It is particularly valuable in assessing product attributes and their impact on consumer decision-making. In this blog post, we’ll delve deeper into the different types of conjoint analysis and the various benefits it can deliver.

Why Do Conjoint Analysis?

By examining various factors such as product features, price, brand, and packaging, conjoint analysis provides insights into how different attributes influence the target audience’s choices. This market research method proves especially beneficial in different stages of the product life cycle, from initial business analysis and product design to the product launch and beyond.

Conjoint analysis aids great product managers, designers, and project managers in making informed decisions by identifying the optimal combination of features and attributes that resonate with the target audience. It leverages research techniques like mail surveys, personal interviews, focus groups, and telephone surveys conducted by skilled survey researchers to gather data on consumer preferences and opinions. This valuable information helps development teams refine and optimize the final product, ensuring it meets customer needs and expectations.

Additionally, conjoint analysis provides insights into the competitiveness of existing products and aids in strategic planning for future product enhancements or new offerings.

Reasons to Conduct Conjoint Analysis

There are several reasons to conduct a conjoint analysis, including:

  • To measure and understand customer preferences for certain product features.
  • To assess or predict how well a new product will do if brought to market.
  • To gain an understanding of how changes in price affect demand.
  • To predict future trends, for example, around the adoption of certain features.

How to Conduct Conjoint Analysis

Choose the Right Survey Type

The first stage is to decide on the correct survey type. There are several ways to do a conjoint analysis — here are the main methods:

  1. Ratings-based conjoint analysis: This is where participants give each attribute a rating, for example, on a scale of 1-100.
  2. Ranking-based conjoint analysis: This is where participants rank the attributes in order from best to worst. There is also a best vs. worst analysis, where participants simply pick their favorite and least favorite attributes from the selection.
  3. Choice-based conjoint analysis (CBC): This is the most commonly used model and the one this guide will focus on. It presents combinations of attributes to participants and asks them to choose which they prefer.

One of the most powerful advantages of choice-based conjoint analysis is that it can allow you to use modeling to predict how customers will feel about combinations they didn’t even assess. In other words, it is an extremely efficient way of predicting responses to features without having to spend a huge amount of time testing each combination.

Identify the Relevant Attributes (Features)

Next, it’s time to decide which product attributes you want to have your respondents compare and assess. The key is not to use too many. We typically avoid using more than 5 or 6 attributes, e.g., for a car: color, engine size. We do this to reduce respondents’ cognitive load to ensure they engage with the choices presented to them.

For each attribute, you need to add levels. For example, if your participants are assessing a smartphone, one attribute might be ‘price,’ and the levels might be $200, $350, and $700.

The levels will usually reflect the different tiers of the product you’re considering selling. For the smartphone, you might be releasing a basic model, a higher-end model, and a deluxe model. The levels for attributes such as price, camera size, and memory will align with those tiers.

Levels should be chosen based on factors like:

  • How interesting and valuable they are for management — will they inform useful decisions?
  • How well they avoid bias?
  • How realistic they are.

In the CBC method, there are two commonly used models for making choices:

  • Single choice with none: This requires the participant to make one choice out of the selection. There is also the possibility to select none of the options.
  • Single choice: This is the same as above, but there is no ‘none’ option — the participant has to pick one.

Design the Questionnaire

Screener Questions

Most surveys start with some screener questions. These are general questions around demographics like the respondent’s age, job title, or purchase habits. The goal is to filter out those who won’t be a good fit for the survey based on the people you’re trying to target.

Introduce and Explain

It’s important to take some time at the beginning of the survey and in your questions to clearly explain what the respondents need to do to answer the questions. Surveys should be as clear and easy to follow as possible.

Create the Right Questions

The questions you choose and how you structure them will make or break your survey. Here are some guidelines to follow:

  • Questions should follow one another logically and be grouped together intuitively. It’s best not to confuse your participants by ordering your questions in a confusing way.
  • People often give more accurate and useful answers when you use situational questions. For example, instead of asking, “Which phone would you buy?” ask something like, “Thinking back to the last time you purchased a phone — if you had the following options instead, which would you have picked?”
  • Finish with some demographic questions so that you can further understand your customer base and analyze the results by demographic to understand any meaningful differences.

Analyze and Take Action

Once the survey has been written, scripted, sent out, and completed by your target group, it’s time to analyze the results and take action on them. This is perhaps the most important part of the process, as it’s where your research can really make a tangible impact.

There are several ways to analyze your results based on how you designed the survey. The most important thing is to collect and analyze your data in a way that makes it easy to draw useful conclusions and share them.

This will allow you to gain real value from the survey and present those findings to others in the company. This:

  • Helps justify your decisions and actions.
  • Informs future plans and inspires new features.
  • Identifies areas that need to change or improve.

At Kadence, it’s our job to ensure you create and conduct the most effective surveys and market research possible, giving your brand the edge. To find out more about how we can help with conjoint analysis and more, get in touch to request a proposal.

Conclusion

Conjoint analysis is a valuable tool in understanding consumer preferences and making informed product development decisions. By carefully designing and executing your surveys, you can gain insights that drive strategic planning and optimize your products to meet market demands. Whether you’re evaluating new product features, pricing strategies, or competitive positioning, conjoint analysis can provide the detailed insights needed to succeed in today’s competitive market landscape.

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