(PREVIEW) Product and Process Design for Supply Chain Management
Module SCM106
 
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SCM106: Product and Process Design for Supply Chain Management
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...A tool called conjoint analysis may be used to estimate the potential benefits from offering customization. Conjoint analysis refers to a method of evaluating consumer preferences by asking individuals to make choices between different sets of options. For example, an auto manufacturer could show consumers a series of paired car profiles with different prices and optional equipment, and for each pair, ask them to select which car they would prefer. The product profiles are carefully selected to help researchers identify consumer choices; sophisticated models analyze the choices consumers made, to identify which options are most important and how much consumers would be willing to pay for them. Provided the sample of consumers is representative of your target market, this information can help you determine what kinds of customization to offer, how to price it, and its expected impact on sales and market share.

Conjoint Analysis (pairing example)
Car A Car B

$25,000

Front & side airbags

Premium stereo

5-liter engine

$21,500

Front airbags only

AM/FM radio

5-liter engine
<< strongly prefer A strongly prefer B >>


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Conjoint analysis would ask a series of questions similar to the above; for each pairing, the customer chooses one of the buttons based on how much they prefer choice A or choice B. As the customer makes choices between various prices and features, patterns of preferences emerge. These patterns can be used to place a value on customization of products (whether to offer choices, how many to offer, and what price to charge for each).

Mass customization may not be suitable for all products and markets, nor is every implementation a "win-win"...