Willingness to Pay: What you need to know when calculating feature willingness to pay
Product optimisation has for a long time been a staple analysis in the market research industry. When we talk about product optimisation, we refer to the optimisation of the features and price of a product or service to maximise some outcome metric, such as market share, revenue, or profit.
A popular method used for conducting product optimisation is Conjoint analysis. The method provides an understanding of what features consumers really value, and at what price. It offers considerable advantages over direct questioning by teasing out which features really matter, rather than taking what people state as being important at face value.
Conjoint works by splitting a product into its constituent parts, known as attributes e.g., Brand, Contract length, Monthly fee, and within each of these attributes we can test different options, known as levels e.g., for contract length we might test 12 months, 18 months, and 24 months. From the resulting output it is possible to determine the impact on consumer preference for any combination of these features and price in a competitive environment.
While Conjoint allows us to identify the optimum price of the product, understanding how much consumers are willing to pay for individual features of that product has become more prevalent and requires additional analysis.
