As a restaurant operator, you are always on the lookout for ways to improve your business. One way to do this is through the use of market research techniques, such as conjoint analysis.
What is Conjoint Analysis?
Conjoint analysis is a research method used to understand how people make choices between products or services.
Today, many restaurants use conjoint analysis to better understand their customers’ preferences and make data-driven decisions about menu offerings, pricing and marketing. This research method is a great option in cases where there is no historical data to rely on or when restaurants want to better understand the impact of different strategies without having to invest in various test-and-learn studies.
Conjoint analysis is based on the idea that people make choices based on the relative importance of different attributes, rather than on the attributes themselves.
By analyzing the responses of participants, a conjoint analysis can help restaurant brands identify the key factors that drive customer preferences and estimate the value that their customers place on different attributes. Here’s how to conduct an effective conjoint analysis:
Step 1: Define the Research Objectives
The first step in conducting a conjoint analysis is to define your research objectives. Identifying the specific questions your restaurant brand wants to answer, such as:
- What menu items are most appealing to customers?
- What attributes are most important to customers when choosing a restaurant?
- What are the optimal price points for new and existing menu items?
- How does demand shift based on price, menu or product changes?
There are different types of conjoint analysis your brand can conduct, such as menu-based conjoint and choice-based conjoint. The specific type you choose will depend on your research objectives and the complexity of your menu offerings.
By defining your research objectives upfront, you can ensure that your conjoint analysis is focused and relevant to your restaurant’s needs.
Step 2: Determine the Attributes and Levels to Include
Next, determine the attributes and levels that you want to include in your conjoint analysis. Attributes are the characteristics of your menu items that are important to your customers, such as price, portion size and taste. Levels are the different options or values for each attribute, such as $2.99, $3.19, or $3.49. for price.
To determine the attributes and levels, you can conduct a preliminary survey or focus group to understand what factors are most important to your customers.
You can also use industry research or your own historical transactional data to inform your choices.
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Step 3: Design the Choice Sets
Once you have identified these attributes, you would then create a set of hypothetical menu options that vary in dimensions. For example, you might create a set of hypothetical family meal bundles that differ in price, variety and quantity.
Each choice set should include a combination of attributes and levels for participants to rate or rank their preferences.
To design the choice sets, you can use specialized software or online tools that generate multiple choice sets based on your selected attributes and levels. You can also randomize the order of the choice sets to reduce bias.
Step 4: Recruit Participants
Once you have designed your choice sets, the next step is to recruit participants for your conjoint analysis. Revenue Management Solutions (RMS) recommends surveying at least 600 participants and selecting a sample size that closely resembles your typical customer segment.
If you include other brands, make sure that you select competitors that your customers associate you with. This will help you get a more realistic outlook and will help in your analysis.
Step 5: Conduct the Conjoint Analysis
With your choice sets and participants in place, you are ready to conduct your conjoint analysis.
Participants will be asked to evaluate and compare the different menu options presented in the choice sets, and their responses will be recorded and analyzed using statistical techniques.
Step 6: Analyzing Your Results
Once the data has been collected, the next step is to analyze the data using statistical software. The analysis will involve estimating the relative importance of each attribute and level and determining the optimal combination of attributes and levels for your restaurant.
By doing so, you will be able to determine which attributes are most important to customers when making dining decisions.
You will also be able to better understand how customer preference changes as factors such as prices change, inflection points and bundling change.
At RMS, we have helped restaurant brands across the globe conduct their conjoint analysis and identify opportunities in their menu offerings and even their price points for new product offerings.
Get Started with Conjoint Analysis
Conjoint analysis is a powerful tool for restaurants looking to improve their business. Through data-driven insights, restaurants can better understand customer preferences and optimize their menu, develop new products, set prices and create marketing campaigns that are more likely to be more successful and profitable.
If your restaurant is considering using conjoint analysis as part of your market research strategy, let our data experts help you gain a competitive edge and grow your business. Contact us today to get started and find out what matters most to your customers.