This article discusses conjoint analysis and how this research technique may have been used by OMDS to determine the features in the new OM-5 camera. Some folks are up in arms about certain attributes of the OM-5. Like using the same sensor as in the E-M1 Mark III, maintaining the older menu, and using an older USB Micro connector. As is often the case, the wish list that consumers may have for a new product can be totally unrealistic given business realities. It is prudent to remember that no camera is perfect, and that all things photographic come with some kind of trade-off.
NOTE: Click on images to enlarge. Photographs have been added to serve as visual breaks.
Products are not developed in a vacuum.
Reading some online comments and related emotional venting that is happening at the moment, one could assume that some people think that new product development is a simple task that is based on arbitrary decisions. Nothing could be further from the truth.
Bringing a new product to market in various industries can cost a minimum of hundreds of thousands of dollars… with these costs easily reaching into the millions depending on the product. It takes a significant amount of market research and understanding to successfully bring a new product to market.
Products begin with market segmentation.
To be effective, companies typically spend time doing market segmentation. This is the process of breaking down a market into subgroups. These subgroups would have common attributes which distinguishes them from other subgroups.
There are a number of types of market segmentation that are commonly used. These include demographics, psychographics, geographic, technological, transactional, behavioural, and so on. Companies use the segmentation strategies that are best aligned with their fundamental business and marketing strategies. If we look at the camera market we can see how various types of market segmentation can be used.
Demographics. Camera companies could assess the size of the market based on the age of photographers. Gender. Income levels. Education. Occupation. Family orientation. Religion. Ethnicity. Based on typical camera club membership it appears to me that buyers of interchangeable lens cameras skew to older age groups with higher levels of disposable income.
Psychographic. This type of segmentation creates subgroups based on how consumers think. Attitudes and values are commonly assessed when using psychographic segmentation. Lifestyle, belief systems, social status, and personal motivations are some of the other factors that may come into play.
Geographic. This is segmentation based on variables such as location. Cultural preferences. Language. Climate and seasonality. Rural versus urban environments can also be assessed. After Japan Industrial Partners (JIP) acquired Sony’s VIAO computer business the company made a decision to segment the market geographically and concentrate on business computer users in Japan.
The reason why this geographic segmentation was chosen could be related to the additional costs to have a broader geographic emphasis, as well as anticipated sales volumes, contribution margins, breakeven points, and profitability estimates.
It is very likely that given the thin margins available in the computer business that JIP decided it would be more profitable with VIAO by focusing on the Japanese market.
Behavioural. The vast majority of businesses use behavioural segmentation. This type of segmentation examines factors like spending habits, purchasing habits, interactions with brands, and benefits desired.
Technological. This type of segmentation divides the market into subgroups based on their interest in, and use of various technologies. Examining the computational photography technology that is built into their cameras, it is clear to see how Olympus/OM Systems has been pursuing technological segmentation.
As noted in some of my previous articles, it is my belief that OMDS has shifted into a Niche Differentiation strategy with the OM-1 being a clear statement in this regard.
What market segments is OMDS targeting?
Comments from OMDS executives and OM Ambassadors have indicated that the company is targeting the nature/wildlife/birding markets as well as adventure travel.
If we look at product and brand attributes of Olympus/OM System products we can see why these target markets make sense for OMDS. Industry leading weather sealing. Supersonic Wave Filter dust reduction. Comparatively smaller size and weight. Outstanding IBIS performance reducing/eliminating the need for tripod use. Computational photography technologies like Bird Detection AI Subject Tracking, Live ND, Handheld Hi Res, Starry Sky, Focus Stacking and Bracketing, and Live Composite.
How does market segmentation help determine product mix and configurations?
Once a company like OMDS does its segmentation research it can lead to fundamental business decisions when the following types of questions are answered.
- What are the sizes of the bird, nature, wildlife and adventure photography markets in terms of annual sales volumes of camera bodies and related lenses?
- What level of market penetration do we currently have in these target segments?
- What is the market share potential of our product(s) in the target segment(s)?
- What product performance attributes are important to buyers in these individual market segments?
- What attitudinal factors are common with buyers in these individual target segments?
- How much money are people in these target segments willing to spend on cameras and related lenses?
- How often do people in these target segments upgrade their camera bodies and lenses?
- What lens configurations do consumers in these target market segments desire? What products are desired but do not currently exist?
- What product features and capabilities are most highly valued?
- How do buyers in the target segments rank order these product features and capabilities in terms of importance?
These questions are only a small sampling of what a manufacturer would want to know and quantify.
What is conjoint analysis?
Conjoint analysis is a quantitative research technique that was first proposed by mathematicians Duncan Luce and John Tukey in 1964. It has been used commercially since the 1970s.
In a nutshell, conjoint analysis is a research technique used to quantify how consumers value various features of a product or service. Product attributes can be grouped in multiple ways and rated by research participants. By analyzing the quantitative data companies can determine what trade-offs buyers are willing to make to acquire the specific product attributes that they most highly value.
Conjoint analysis can also be used to establish the price elasticity of various product configurations… i.e. how much consumers would be willing to spend for a particular set of product features.
If we ponder the needs of photographers who are heavily involved with the photographic genres of nature/wildlife/birding and adventure travel, we can understand the importance of using conjoint analysis. It helps to quantify the exact combination of features and capabilities that should be included in a particular camera model like the OM-5.
Obviously a company needs to differentiate its various models so it does not cannibalize sales of higher margin products and destroy its profitability. It is always good to remember that companies are not charities. They need to make a profit to survive.
How is conjoint analysis done?
There are a number of approaches that can be used with conjoint analysis so we won’t go into all of them in this article. One of the most common approaches is choice-based conjoint. My guess is that this was likely used by OMDS to establish the feature set of the new OM-5 camera. An earlier article outlined my views on the OM-5 strategic intent. We won’t rehash that information in this article.
It is likely that OMDS would have created a comprehensive listing of individual product attributes including:
- sensor resolution, dynamic range, colour depth, noise reduction
- handling and ergonomics (perhaps with specific details on external body controls)
- number of card slots and card type
- frame rates
- menu format and display
- IBIS performance
- physical wiring connections
- battery size and performance
- EVF characteristics
- rear screen attributes including resolution, touch screen, and articulation
- size, weight and cost
- availability of various computational photography technologies
- construction material
- sensor dust cleaning
Obviously the list could include many more individual factors than are listed above. A number of differentiated purchase options along with pricing would be created. Consumers would then review the various options and rate each one in terms of their relative individual preference, and the price level at which they would purchase that option.
By analyzing the data on the various options, researchers can then identify specific attribute trade-offs that would result in the optimal product configuration preferred by the target market… that could be sold within an acceptable market price range.
The optimal product configuration would need to fit within physical manufacturing parameters of the company, and be able to be built at a cost that would produce the desired contribution margin per unit based on a target selling price.
The per unit contribution margin would then be divided into the fixed costs for that product. This would establish the breakeven point in terms of the number of units needed to be sold. That proposed breakeven point would be evaluated against market segment size and market share potential to determine the viability of a specific product.
Let’s go full circle and tie all of this back to some people moaning incessantly about the OM-5 not having a new sensor. Or not using the same menu as the OM-1. Or having an older USB cable connection. Or any one of a number of other individual complaints.
Executives that run companies do not intentionally make stupid decisions. Nor do they act in a cavalier fashion and arbitrarily add or subtract product features on a whim. They do their level best to offer their target customers the optimal product configuration that meets their customers’ needs, and at a price those customers are willing to pay.
The OM-5 in Canada lists for $1,699. What does a photographer get for their money? They get a small, lightweight camera body that is IP53 rated. 7.5 steps of IBIS performance. Live ND. Starry Sky AF. Live Composite. Focus Stacking. Focus Bracketing. Handheld Hi Res. Supersonic Wave Filter dust reduction. Fisheye compensation. Keystone compensation. Art filters. Pro Capture H/L. HDR auto composite and bracketing for HDR post processing… to name some of the OM-5’s capability.
So, the fundamental question is… if a photographer values all of those capabilities that are resident in the OM-5, what else can they buy that offers them all of those capabilities for less money? The answer is quite probably nothing.
Are their trade-offs for people who value all of those features and capabilities that are resident in the OM-5? Of course there are… and some of them are the items that some folks are moaning about in internet chat rooms.
I appreciate that some people will nitpick the list of OM-5 capabilities noted above, and downplay the importance of many of those features. That type of response clearly tells us something very simple and fundamental. That particular photographer is not part of the market segmentation that OMDS is targeting.
Photographs were captured handheld using camera gear as noted in the EXIF data. Images were produced from RAW files or out-of-camera focus stacked jpeg images using my standard approach in post. This is the 1,225 article published on this website since its original inception in 2015.
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