Consumer Choice Modeling

There is a good article in Strategy + Business about Consumer Choice Modeling.  Consumer Choice Modeling is a tool to project how well different product options and their attributes will do in the market.  Rather than being a simple preference test, it projects the consumer's likely behavior at the store shelf, given a specific set of choices.  As an example, they said that this tool accurately predicted that Apple's first iPhone was priced too high, which the market subsequently validated.

I think tools like this are great.  However, problems arise when they are used at the wrong point in the process.  These tools are best used after a new product is defined; the benefits, the details of how they will work, and what they will cost are all worked out.  These tools do not help you to develop a breakthrough innovation from scratch.  For that you need to figure out what would motivate a consumer to try a new solution in the first place; what problem really needs to be solved. 

The reason these tools are often misused is that they deliver an answer with a high degree of certainty.  This makes people comfortable.  But it does not take the place of the deep understanding required to figure out what a new offering should be.  What they do is confirm or disprove the decisions that have been made so far, but they will not give you information to come up with the idea in the first place - unless the idea is an improvement on what already exists. 

Once again, it all comes down to clearly understanding the scope of your innovation effort.  If you are already working with an existing offering, and want to improve it, then you can start with tools like Consumer Choice Modeling.  If, however, you want to develop something new, then save the Consumer Choice Modeling tool until you reach a point at which you have developed a set of choices for the consumer to make.