MARKET RESEARCH APPLICATIONPresentation on

TRADE-OFF MODEL

Names Roll No

Amol Kadam 28

Vaibhav Panchal 39

Tejas Vasa 58

Niraj Dwivedi 72

Shashank Pamul 94

Pratima Patil 98

GROUP MEMBERS:

Presented to: Prof. Shilpa Shinde

TRADE-OFF MODEL

• The model was first presented by Oliver Williamson.

• This model emphasizes the trade-off associated with horizontal mergers between gains resulting from lower costs of production and the losses associated with higher prices due to greater degree of monopoly power.

BASIC IDEA OF THE MODEL

EXAMPLE• Effect of merger of Northwest Airlines (NW)

with Republic Airlines (RC) on prices

Market Total Markets

Relative prices Average change(%)

1985 1986 1987 1985-1987

Category 1 16 2.8 4.5 5.9 4.3

Category 2 41 2.6 3.5 2.8 2.6

Category 3 11 8.2 10.3 7.5 5.2

Category 4 16 6.7 9.5 7.1 5.5

LIMITATIONS• Model only considers the effect of the merger

on price.• The model ignores the possibilities that similar

gains in cost reductions and efficiencies may instead arise due to growth of market demand.

CONJOINT ANALYSISDefinition: Conjoint analysis (also called trade-off analysis) is a

multivariate technique used specifically to understand how consumers develop preferences for products or services and to formulate predictions about market attitude towards new product concepts.

Different Perspective different goals• Buyers want all of the most desirable features at lowest

possible price • Seller wants to maximize profit by:

Minimizing cost of providing featuresProviding products that offer greater overall value than

the competition

Conjoint Analysis is concern with understanding how people make choices between products or services or a combination

of product and service, so that businesses can design new products or services that better meet customers underlying

needs.

WHY TO USE CONJOINT ANALYSIS?

• Conjoint Analysis determines how your customers trade-off different price levels with the features of your product that they most desire - without asking them directly.

• Conjoint Analysis tells you the must-have features of your product by segment, so that you can tailor your marketing efforts to a particular demographic or behavioral profile.

• Conjoint Analysis reveals what factors drive consumer behavior: brand, price, or features - and whether your brand can command a premium.

Conjoint Analysis helps to Determine:

TYPES OF CONJOINT ANALYSIS

• Traditional Conjoint Full ProfilePartial Profile/Fractional Factorial Design Self Explicated

• Adaptive Conjoint Analysis(ACA)• Choice Based Conjoint(CBC)

ASSUMPTIONS• The buyer perceives a product or service as a bundle of

attributes or characteristics.• When a potential buyer evaluates a product, they mentally

associate a value (or a utility) to each attribute level.• To determine the total utility of the product, the buyer

mentally combines the amounts of utility provided by each attribute at various levels.

• The rule used in combining attributes to produce an evaluation of the total utility of the product/service is a compensatory rule.

To compare the different product concepts, the researcher must select a measure of preference either:

• The non-metric rank-ordering method (i.e. rank-ordering the product concepts from most to least preferred)

• The metric rating method (i.e. a 1 to 10 scale).

ATTRIBUTES AND LEVELS• Attribute: An Attribute is a general feature of a product or service – say

size, colour, speed, delivery time

• Level: Each attribute is then made up of specific levels. So for the attribute colour, level might be red, green, blue, and so on.

For Example:-The attributes to be considered are:

• Brand: L'Oreal, Garnier, Gillette and Riem • Price: 50, 100, 150 and 200 • Types of packaging: spray and aerosol.

In this study, there three attributes of which two have four levels and one two levels, thus in total there are 32 (4x4x2) distinct product concepts.

CONJOINT METHOD• First, select what attributes of the product you would like to

test, and what the possibilities are for each attribute. To demonstrate, let's use the example of an ice cream shop, which might want to know consumer attitudes about:

– preferred flavor (vanilla, chocolate, strawberry, or black raspberry)

– price (Rs 10, RS. 15, RS. 20, Rs. 30)– container (cone, cup)– freshness (homemade & fresh, factory-produced)– healthiness (reduced fat, regular)

What Types of Companies Have Used Conjoint Analysis?

• A wide variety of companies and service organizations have successfully used conjoint analysis. For Example: The Western Canada Lottery Corporation A natural gas utility

LIMITATIONS• The attributes are totally new to consumers .

• The number attributes to consider to have a realistic description of the product concept is too large.

• The cognitive capacities of the respondents are weak.