Benefit Formation and Enhancement

The identification of product attributes and features that are essential for a benefit to exist is critical to new product development and formulation. Some attributes are benefit enabling in the sense that their presence indicates that an offering is responsive to a need, and their absence points out that the product is not responsive. Not all agricultural products, for example, are seen as having safety advantages, and specific organic certification such as the USDA organic label may be needed for some consumers to consider an offering as providing a benefit of reducing the level of health risks. Benefit formation hinges on these critical attributes being present, while other attributes may only enhance a benefit that has already been formed. Benefit-forming attributes therefore create a specific form of interaction among product attributes that may be heterogeneously distributed in the population. We develop a model to identify benefit-forming attributes and apply it to three conjoint datasets where we provide evidence of their interactive effects on preferences. The counter-factual exercises across three datasets highlight the importance of benefit-forming attributes in product design as well as in preference segments.