Page 170 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

Unit 7: Logistics and Characteristics of Modes of Transportation

3. Carriers Notes
4. Warehouse providers
5. Freight forwarders
6. Terminal operators

7. The Government

Trade-off Analysis

Trade-off analysis is a family of methods by which respondents’ utilities for various product
features are measured. The utilities are measured indirectly. Respondents are asked to consider
alternatives and state a likelihood of purchase or preference for each alternative. As the respondent
continues to make choices, a pattern begins to emerge which, through complex multiple
regression techniques, can be broken down and analyzed as to the individual features that
contribute most to the purchase likelihood or preference. The importance or influence contributed
by the component parts, i.e. product features, are measured in relative units called “utils” or
“utility weights.”
Respondents are asked to tell the interviewer directly how important various product features
are to them.

Trade-off analyses produce several types of information. They tell us what features are most
valued by customers. They allow us to model how likely people will be to purchase various
configurations of products, the share of revenue these products will most likely receive and
what role price plays in the assessment of acceptability.
Now, we will discuss the trade off types briefly:

Experimental Design: A critical issue in most trade-off methods is the selection of product
attributes to be combined together to create each product configuration to be tested.

If every possible combination of attributes was included in the study, the study would be
said to be using a complete or full factorial design. This is desirable but very seldom
practical. When a fractional factorial design is used, only a fraction of the total possible
number of product combinations needs to be tested. It must be kept in mind, that whenever
a fractional factorial design is used, some information will be lost. It is the job of the
researcher creating the experimental design to ensure that the information being sacrificed
does not compromise the project’s ability to answer the research objectives.
Bridging: Even with the most efficient fractional factorial design, we still end up with
more products than can be practically accommodated. One possible solution to that problem
is bridging. Bridging allows the attributes to be divided into two or more sets. Each set of
attributes is treated like its own trade-off study. A fractional factorial design is created for
each set of attributes. Respondents are asked to rate or rank two smaller sets of products
rather than one large set. The utilities are calculated for each trade-off exercise independently
and bridged together to create one final set of utilities.

Cognitive and Non-cognitive Behaviour: Critical to the selection of an appropriate trade-
off technique is the issue of which type of behaviour, cognitive or non-cognitive, best
represents the behaviour being measured. Cognitive behaviour is behaviour that is based
on rational, conscious decision-making. Such factors as – price, functionality or durability
are typically cognitive. Non-cognitive behaviour is behaviour that is based on less tangible
or even less conscious factors such as status, aspiration, insecurity, etc. One might argue
that the selection of a life insurance policy, a television set or a water purifier are all

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