Consumer Trade-off

Posted by Rikki-Lee Schmitt on November 1st, 2006 at 3:05pm

There has been increasing discussion in recent years on the importance of Conjoint Analysis, Choice Modelling and Trade-Off Analysis – where consumers voice their individual preferences as they trade-off alternative potential products/services against each other to subconsciously reveal their most valued attribute.

Trade-off Analysis [also known as Conjoint Analysis or Choice Modelling] is ‘a multivariate technique used to quantify the value that people associate with different kinds of product/service attributes’. This technique is used largely in new product design, where consumers give preference to one combination of product attributes over another. This helps the marketer to decide which aspect of the new or improved product is of primary importance to their target market. Rather than rating the importance of a specific product attribute [i.e. brand], customers are forced to choose between different product variations [i.e. brand vs price]. This is similar to a real life scenario when comparing products in the evaluation stage of the buyer decision-making process. 
Once the valued attributes have been identified, a market can then be segmented by these attributes instead of demographic segmentation [e.g. gender and age]. For example, credit card users could be segmented by the services they most desire: fees and interest; credit line; or both.

A recent development is Choice-based Conjoint Analysis, which involves a respondent choosing among alternative combinations; rather than rating or rank-ordering a single product combination [original Conjoint]. An example of a typical question lies below.

Choice-based Conjoint Analysis
“If you were looking to buy a box of
chocolates today and these were your
only alternatives, which would you choose?”

Price sensitivities are often difficult to measure through a regular survey, as the respondent will consciously choose the lowest possibility offered [$3]. Conjoint offers an advantage of consumer trade-offs, where at some point they must either pay more to get more; or continue to pay less, but get even less. For example, when purchasing a box of chocolates, I am willing to pay slightly more for Red Tulip chocolate [$5], than an unknown brand [$3] which may taste horrible and is therefore a waste of my money. On the same token, I would settle for Red Tulip over Lindt chocolate, as my price sensitivity increases at a certain point [$8].

Hence, the beauty of Trade-off Analysis is a new and more precise finding that delves into the consumers subconscious decision-making patterns and allows marketers to respond to what their consumers really do intuitively value.
 

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