Product optimization studies use trade-off designs (conjoint and choice) to identify just the right product and pricing, but the ideal product will depend on the needs of the individual buyer. For any product or service category, different market segments exist consisting of buyers with unique needs who will respond more favorably to an offering designed for them than one that satisfies a non-existent average consumer. For example, a financial product may include segments with needs centered on different value propositions such as great value (low fees), rewarding loyalty, enabling control with technology, enhanced security, or accommodating a lifestyle such as travel.
“A benefit segmentation derived from a trade-off study offers tactical advantages, allowing decision-makers to identify unique product and pricing configurations to satisfy underlying niches.”
Rockbridge’s MaxProduct™ solution is designed to measure the impact of features, pricing, channels, and brand on demand, but it also solves the problem of identifying market niches. We accomplish this by gathering individual input on what consumers desire in a product. Some of this input is gathered in the form of desirability ratings of features and prices and some is gathered through phased ranking exercises that allow us to derive the precise value of features. With this information in hand, we cluster consumers into “benefit segments” who have similar needs and preferences. Each segment is indicative of a market niche that can be satisfied by a tailored product.
Traditional attitudinal segmentation studies have a strategic focus, revealing insights about buyer values, underlying needs, and purchase behaviors. In contrast, a benefit segmentation derived from a trade-off study offers tactical advantages, allowing decision-makers to identify unique product and pricing configurations to satisfy underlying niches. To illustrate a benefit segmentation in practice, Rockbridge conducted a comprehensive study of primary and secondary school students and parents for an education services client. The study itself included a trade-off analysis of features such as curriculum content, enrichment activities and venues for schooling. In addition to showing how the trade-offs affected the choice of schooling options, Rockbridge was able to segment the market into five groups with unique needs, such as a segment interested in cutting edge, futuristic curriculum and one focused on a traditional bricks and mortar education. The client found the description of the segments valuable for planning the roll-out of its service variations. To facilitate decision-making, Rockbridge set up a simulator to allow the client to model market response to product variations within each segment. Rockbridge also identified the distribution of the segments by geographic markets so the client could optimize its education offerings by location.
Like the old folk tale reveals, Goldilocks wanted her porridge, bed and chair to be “just right” for her. By segmenting markets based on needs uncovered in a trade-off study using MaxProduct™, management can develop more than one product, each uniquely suited to the needs a portion of the market.
Written by: Charles Colby, Chief Methodologist, Principal and Founder