Williamson trade-off model

Market Research ApplicationPresentation on Trade-off ModelNamesRoll NoAmol Kadam28Vaibhav Panchal39Tejas Vasa58Niraj Dwivedi72Shashank Pamul94Pratima Patil98Group Members:Presented to: Prof. Shilpa Shinde Trade-off model

The model was first presented byOliver Williamson.

This model emphasizes the trade-off associated withhorizontal mergersbetween gains resulting from lowercosts of productionand the losses associated with higherprices due to greater degree ofmonopoly power.

Basic Idea of the Model

ExampleEffect of merger of Northwest Airlines (NW) with Republic Airlines (RC) on pricesMarketTotal MarketsRelative pricesAverage change(%)1985198619871985-1987Category 1162.84.55.94.3Category 2412.6 3.52.82.6Category 3118.210.37.55.2Category 4166.79.57.15.5LimitationsModel 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 goalsBuyers 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 Analysisdetermines how your customers trade-off different price levels with the features of your product that they most desire - without asking them directly.

Conjoint Analysistells 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 Analysisreveals 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 AnalysisTraditional ConjointFull ProfilePartial Profile/Fractional Factorial DesignSelf ExplicatedAdaptive Conjoint Analysis(ACA)Choice Based Conjoint(CBC)

AssumptionsThe 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 LevelsAttribute: 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 MethodFirst, 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

16LimitationsThe 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.