Product Line Strategy
Conjoint Analysis | Case #1: Product Line Strategy
A major U.S. bank faced declining growth and increased competition in its residential mortgage business. The challenge was to determine product strategies to return the bank to its position of strength.
Sawtooth Technologies conducted research into consumer preferences regarding mortgage product lines, modeled preferences for client and competitive products, and recommended an unexpected product strategy.
1. Created a computer-based interview using conjoint analysis to allow consumers to express their trade-offs between attributes such as interest rates, type and name of institution, service offered, and other features.
2. Calculated utilities that represented the decision-making weightings for each interviewee.
3. Built a model of the market, featuring both a demand side (utility values) and supply side (available products).
4. Predicted the likely appeal of the bank’s product line as it was currently configured and tested a variety of scenarios:
- Added, changed and deleted items from the product line and compared the resulting outcomes
- Predicted competitive responses to the bank’s actions and modeled these actions, comparing outcomes under varying competitive situations
The initial expectation—the client’s and ours—was that we would propose changes to the existing set of over a dozen products, but we were all surprised to see that the client’s share held up as products were removed from their line. We recommended a streamlined set of mortgages, cutting the product line in half, that the model predicted would strengthen the client’s market position.
- Operational costs decreased because there was a smaller set of products to support.
- Marketing and advertising messages became significantly clearer with a smaller “grid” of products to promote.
- The mortgage market share increased dramatically after rollout of the new product line.