This Case Study highlights how “marrying” a Trade-Off Analysis technique called a Conjoint Analysis with Due Diligence was used to assess and ultimately consummate a major New Business Acquisition Deal for a healthcare company. Like a “flu shot”, Due Diligence helps you prevent the flu now so that you may not have to deal with the problems later. Therefore, performing Due Diligence will weigh the risks and benefits of making major business decisions. Conjoint Analysis is a “powerful” quantitative marketing research tool. Conjoint Analysis helps Marketing measure and quantify the inherent value that consumers place when “trading-off” having or not having certain product or service features. Conjoint Analysis can be used to model and simulate the current and future competitive market situations. As a result, the method can add significant and convincing insight when conducting Due Diligence to gauge the risk-reward “trade-offs” of major product development or business acquisition decisions.

1. 1
Is a “Shot in the Arm” Needed When Assessing
New Business or Product Opportunities?
This Case Study highlights how “marrying” a Trade-Off Analysis technique called a
Conjoint Analysis with Due Diligence was used to assess and ultimately consum-
mate a major New Business Acquisition Deal for a healthcare company.
Like a “flu shot”, Due Diligence helps you prevent the flu now so that you may not
have to deal with the problems later. Therefore, performing Due Diligence will weigh
the risks and benefits of making major business decisions.

2. 2
sometimes need to be made
quickly – or the opportunity can
be lost.
• The risks are high – but the po-
tential rewards could more
than offset the initial risk for
years ahead. Likewise, the cost
of making a bad decision can
linger for years at a company.
This newsletter highlights how a
valuable market research tool
called TRADE-OFF ANALYSIS (aka,
Conjoint Analysis) can be the
“little shot in the arm” that is
sometimes needed when conduct-
ing formal Due Diligence for po-
tential business or product acqui-
sition opportunities.
The “shot” will provide you the
added benefits of improving the
chance of making the best “go or
no-go” decision. Incorporating
Trade-Off Analysis into the Due
Diligence process will provide:
1. Greater success at assessing
the current and future compet-
itive viability and “health” of a
new product entering a market
2. A head start on devising
marketing strategies for new
products from the moment that
the acquisition becomes finalized
What is Due Diligence? Why is this Important to the New Business
Development Process?
Due diligence is the final stage in the business-
buying or product-buying process.
• It is during this time that all of the target compa-
ny’s books, files, records, financial statements,
and business plans are “opened” so that the buy-
ing company can evaluate and investigate the in-
tegrity and accuracy of the information.
Each year many of us make a
decision as to whether or not
to get a flu shot. We may weigh
the pros and cons of getting the
shot or not – “I don’t like needles
– but I can’t afford to miss any
days from work, school, or not
being up to speed for my family”.
The benefits that DUE DILIGENCE
provides are like a flu shot – the
shot helps prevent the flu now so
that you do not have to deal with
the symptoms and problems later
on. The trade-offs you must
make are being “stuck in the
arm today” vs. risking getting a
full-fledge flu and being unpro-
ductive at home or work, or even
worse, end up in a hospital.
There is a lot of pressure when
assessing NEW BUSINESS or NEW
PRODUCT ACQUISITIONS. Part of
the challenge is that decisions
Due diligence is used to investigate and evaluate a
business opportunity. This opportunity may be
buying a business, merging with another organization,
or acquiring an actual product from a company.
In general, due diligence is a concept and formal pro-
cess that describes a sense of duty and obligation to
exercise care (i.e., diligence) in a business deal. It is
“doing your homework” so that your company does
not make a costly mistake.
• The process covers a thorough investigation into all
relevant past, present, and future aspects of the busi-
ness and/or products that may be acquired.
PETITT: Sp_12SP
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Issue I—v20.A
What is Due Diligence?
Case Study
Primary Methodology Used
Trade-Off Analysis (also
known as Conjoint Analysis)
And the “Winner” Is ...
The “Crystal Ball” to the
Future
Benefits of Using Trade-Off
Analysis for Your Team!
Is a “Shot in the Arm” Needed
When Assessing New Business or
Product Opportunities?
by Steve Petitt, MBA, B.S.
A.G. Lafley, former CEO of P&G
said of new product success and
failure —
“Both (product) innovation and
acquisition are risky and have high
failure rates: 80% plus for new
product innovation in our industry;
70% plus for acquisition.”
Nonetheless,
“...an acquisition was a platform for
future innovation.”
“... You have to identify innovations
that will help your business keep
growing well into the future.“

3. 3
have used the products. This need-
ed to be confirmed.
The business opportunity for
Client “A” was framed around the
following background information:
1. The new products were
recently launched into the
market but did not gain the
market traction that they
were expected to get based on
their unique and innovative
product designs.
2. A big reason for the lackluster
launch was that awareness
levels for the products were
not effectively established by
the Selling Company.
▪ They did not have the
resources to properly market
the products – even though
they strongly believed that
they have the products and
technology that surgeons
desire.
❖ Some anecdotal
evidence that this may be
true was expressed by
some early users of these
products via the Selling
Company executives
themselves (possibly true
– but potentially a biased
assessment).
Situation & “Opportunity”
Client Company “A” was pre-
sented with an opportunity to
acquire a new small company that
had four (4) new technologically
advanced surgical device products
for surgeons.
• The new products will open up
a big new market for them
and enhance their current
product
offerings.
• The devices
are used for
very common
general, gy-
necological,
and gastrointestinal laparo-
scopic surgical operations.
Issues to be Assessed
The most important objec-
tive of this research was to
assess how Surgeons would accept
the four different surgical devices
over what they are using today.
In addition, the Selling Company
claims that both of its two lead
products share a unique feature
that is greatly demanded and well
accepted by the surgeons that
The Clock is Ticking ...
Nevertheless, Client “A” was
diligent enough to realize that
they must assess these products
using an objective approach.
Moreover, the clock was ticking as
the due diligence review period
was to begin in about two weeks.
• Once the due diligence review
period started, there was less
than 6 weeks to make a deci-
sion as to whether or not they
wish to be in the running versus
other competing suitor compa-
nies to make a serious offer to
the Selling Company.
Case Study (Due to Confidentiality Reasons, some of the Information has been “Modified”)
• The market potential of a new product or
product line.
Market Research can be an eye to the future for a
new business acquisition. There
are tools and methods that when
used effectively can provide valu-
able objective insight into the po-
tential viability of the new busi-
ness opportunity.
• Without this forward-
thinking insight, a company may be making
an important and costly business decision by
only looking at information in their rearview
mirror.
How Does MARKET RESEARCH Play a Role in
the Due Diligence Process?
Many times another key component of the new
business investigation is the need to conduct
market research with the customers or suppliers of
the Selling Company. The research may be conducted
to evaluate, among other objectives:
• The strengths and weakness of the target
company and its products as perceived by
customers.
• Gain an understanding of the market trends
that customers and potential customers believe
would impact the viability of competing in the
marketplace in the future.
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4. 4
Accordingly, another question that needed to be
answered was:
“Does the current leading brand have enough
customer loyalty and brand equity to
effectively block a new player from successfully
entering the market?”
• Therefore it was critical to determine if the unique
features of the new products have enough
perceived “value” to offset any brand equity
that may already be established by the current
products used now.
The Table below shows the Attributes and associated
Feature Options for the current and new devices.
The Attributes and Feature Options were used to con-
figure and describe a series of Product Concept Al-
ternatives that would be evaluated and rated by par-
ticipants. See example on next page.
The number of Attributes and Options used in this
study represented 4,000+ different possible configu-
rations of the Product Alternatives.
• This obviously would be an unbearable or unrealistic
task for any participant to complete.
• However, by using experimental design techniques,
only a fraction of these possible configurations are
necessary to use in this study.
❖ Yet, this fraction will still provide all the information
that is required to help make Client “A” make this
important business decision.
Trade-Off Analysis (also known as Conjoint
Analysis)
Due to the strategic nature of this major business
decision, the central methodology of the Study
was a quantitative technique called TRADE-OFF
ANALYSIS (a.k.a., Conjoint Analysis). The tool
was used to measure the attractiveness, sales po-
tential demand, and if a new-to-the-market
company could realistically succeed versus the
products of established players.
• In addition, the method would provide the Brand
Team valuable direction as to the features and
benefits that should be
promoted in order to
gain the strongest
interest to use the
devices.
• See the “ADVANTAGES
of Trade-Off Analy-
sis” section on next
page to learn about
some advantages of he
method.
Relevant Product Attrib-
utes and Feature Op-
tions Carefully Deter-
mined
Atotal of six (6) rele-
vant product Attrib-
utes were identified to de-
scribe the products. In addition, either two or three
Feature Options defined each Attribute.
New and current product Attributes and Feature
Options were carefully determined in a way that not
only described the new products but also included
the important features associated with the current
products.
• This was important since we needed to measure
if Surgeons would trade-off certain features of
the new products over the features of the
current competing devices.
In addition to the functional features of these devic-
es, Client “A” wanted to determine if Brand Name
was a major barrier to entry.
Primary Methodology Used
ATTRIBUTES
Brand
Cannula
Diameter Sizes
Available
Insufflation
Valve
Abdominal
Port
Visualization
Mode of Entry
into Abdominal
Wall
Usage Type
FEATURES
Option #1 New Brand
5 mm, 10 mm,
and 15mm
Automatically
Closes based on
CO2 Pressure in
Abdomen
Has a Laser
Pointer at End of
Tip to Direct
Insertion
Bladeless (no
Trocar)-- Cannula
inserted via a
Screw-Type
Motion with a
Blunt Tip
Disposable
Device -- for
Single Use
Only
Option #2 Brand "Q"
10 mm, 12 mm,
and 15 mm
Manually Closed
by Adjusting
Dial
Does Not Use
any Additional
Lighting at End
of Tip to Direct
Insertion
Sharp Conical
Blade on Tip of
Trocar for Quick
Insertion
Reusable
Device
Option #3 Brand "R"
5 mm, 8 mm,
and 12mm
Option #4
8 mm, 12mm,
and 15mm
Attributes / Feature Options Table
These are Used to Describe
Different Configurations of
Product Alternatives ...
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5. 5
IMPORTANCE that the different Attributes and
Features had in driving preference.
❖ This is one of the most useful and powerful
outputs that Trade-Off Analysis provides when
assessing the value of the features associated
with products or services.
Trade-Off Exercises Devised for
Study
Due to the nature of how the
four new products will be used
by Surgeons, two separate Trade-
Off exercises were incorporated into
the study.
• Using an experimental design,
24 Alternatives were needed for
each of the two exercises to
capture the main effects of how
the different Attributes and
Features independently influence
preference levels.
Surgeon participants read the de-
scription for each Alternative and
then rated the strength of their
Preference-to-Use the device if it
was available today.
• Based on their responses across
the different Alternatives, the relative importance
and value of each Attribute and Feature are
statistically deduced and quantified.
• The implied Trade-Offs that surgeons made when
rating their preference across the different
Alternatives are used to derive and calculate the
ADVANTAGES of Trade-Off Analysis
Every day we make choices between products and
services that we use or hope to use. Consciously
or subconsciously we are making decisions using trade
-offs between various alternatives.
Trade-Off (Conjoint) Analysis is a powerful multi-
variate statistical technique that is used to measure
the underlying utility value of Product Attributes
and Features by considering them jointly, rather than
separately, in the overall decision to use a product.
Advantage #1: Instead of asking customers to rate
how much value they would place on each separate
feature (aka, “stated importance”), Trade-Off Analysis
will ask customers to rate or choose a product or ser-
vice by looking at them in their entirety across all
features. This presents a more realistic experience for
participants.
• Text, pictures, even videos can be used to describe
the products or services.
Advantage #2: The “magic” behind Trade-Off Analy-
sis is the discreet way it measures the relative im-
portance of every attribute and feature of a product or
service. The ratings or choices data that participants
provide when evaluating an entire product or service
profile (see Advantage #1) are used to
compute the “derived importance” of
the attributes (e.g., Brand Name) and
utility values of the individual features
(e.g., Coke, Pepsi, 7-Up).
• This is a very powerful benefit over
simply asking “How important is X-Y-Z feature on
a 1 – 10 scale?”; Participants will undoubtedly
say most, if not all, features are important.
Advantage #3: The data captured
are used with market simulation
models that will predict preference
“shares”. Therefore, simulations pro-
vide the added benefit of evaluating
the sales potential and risks associat-
ed with entering new markets, identi-
fying and understanding market segments, or as-
sessing new product ideas.
• Also, the models can provide a rich source of
“what if” insights. For example, what happens to
your “share” if a competitor makes changes to its
products or a new competitor enters the market?
"The best way to predict the future is to create it."Peter Drucker —
ATTRIBUTES FEATURES:
Mode of
Entry into
Abdominal
Wall
The device uses a ...
Bladeless (no Trocar) entry approach-- Cannula inserted via a
Screw-Type Motion with a Blunt Tip
Port
Visualization
At the end of the tip a Laser Pointer directs insertion into
abdomen
Insufflation
Valve
Control of CO2 gas is Manually Closed by adjusting dial on top of
handle
Usage Type
The device is ...
Entirely Disposable -- for single use only
Cannula
Diameter
Sizes
Available
The device is available in ...
5 mm, 8 mm, and 12 mm sizes
Brand
The device is provided by ...
Brand "Q"
Product Alternative #10
VERY WEAK
Likelihood I
Would Use
this Device
        ✓  
VERY
STRONG
Likelihood I
Would Use
this Device0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Please RATE your LEVEL of PREFERENCE on the Scale below:
** Example **
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6. 6
The relative importance of the six (6) Attributes
was quantified. This information prioritized the
Attributes in terms of the power they have in driv-
ing a Surgeon to want to use a device.
• This was the first critical piece of information
that was used to help the Brand Team understand
some of the inherent value and potential for the
new products.
These results indicated that over 50% of the Im-
portance Weight associated with influencing a Sur-
geon’s Likelihood-to-Use a device was driven by just
two Attributes.
• As a result, the Brand Team now knows where it
must focus its marketing strategies in order to
capture the early attention of its target custom-
ers.
1. Provide participants a brief overview of the prod-
ucts and new features in comparison to current
products on the market
2. Capture some initial reactions about the new prod-
ucts
Participants evaluated 24 Alternatives each for two
Product Categories.
• Since participants are knowledgeable about and
interested in these types of devices, this exercise
was simple for them to complete.
Data Collection Approach
Due to the quick turn-around time for this project,
an Internet Survey was developed to collect
the data. Seventy-five (75) Surgeons were sur-
veyed.
Before the Trade-Off ex-
ercise, participants were
shown visual and writ-
ten descriptions of the
four new products. This
was done to:
Relative Importance of Product Attributes
“Easier” Way to Interpret Product Feature Utili-
ty Values ...
In addition, each of the individual Feature Options
associated with each of the Attributes were quanti-
fied for the relative value (aka, Part-Worth Utili-
ty) they have in making a surgical device more pre-
ferred over another alternative.
The Utility Values are scaled from 0 to 100 across
all of the 15 Feature Options used to describe the
Product Alternatives.
100 = Greatest overall power in influencing
Preference for a product
0 = Least amount of relative power in influ-
encing Preference for a product
This unique re-scaling devised for our clients is ben-
eficial because it clearly shows the relative
strength of the Utility Value of each Product Feature
as compared to the other Features across an easy to
understand measurement continuum.
See “ATTRIBUTE FEATURE OPTION SUMMARY”
Chart on next page.
This intuitively easy scaling has been quite useful
when presenting Trade-Off results to:
• Clients that are relatively new to the methodolo-
gy
• Quickly highlight how the Utilities translate into
identifying the key features to highlight when
assessing products, de-
signing new products, or
making promotion-
al decisions.
“Don’t find customers for your products; find products for your customers.”Seth Godin —
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Mode of Entry
into Abdominal
Wall
28%
Port
Visualization
25%
Insufflation
Valve
19%
Cannula
Diameter Sizes
Available
15%
Brand
8%
Usage
Type
5%
Relative Importance of ATTRIBUTES
0= Least
Power
Across ALL
Attribute
Options
100 =
Most
Power

7. 7
Moreover, the results show that the Brand Equity of
the Market Leader (Brand “Q”) is not insurmount-
able. The value of the unique features of the new
products will make brand name less of a reason to
want to use a device. This is important to know since
Client “A” will be a new player in this market.
Utility Values are Used to Identify the “Ideal”
Feature Options that Customers Desire
The Brand Team was interested in learning if the
new features of the new products offer signifi-
cant value over what surgeons may be using today.
In addition, Client “A” was particularly curious in vali-
dating if one particular feature does have the sig-
nificant value that they were told was so by the
Selling Company.
• In fact, that feature was seen as
being a very valuable new feature --
#2 overall with an 86 utility score.
• In addition, the new products had
features that were associated with
the highest Values across four At-
tributes. The features within two of
these Attributes are also unique to
the new products -–
❖ Laser Light on Tip
❖ Having an Insufflation Valve
that Automatically Closes
 Therefore, the results indicate
that the new products have sev-
eral “ideal” features that would
make them likely to be pre-
ferred over the devices used
today.
The “Crystal Ball” to the Future — “Share”
Simulations
Lastly, a series of Preference “Share” Simula-
tions were conducted using the Trade-Off Re-
sults. The simulations typically produce the most
important information from a Trade-Off Study.
• The simulations use the Utility Values across the
Attributes and Feature Levels to measure the per-
centage of customers that would prefer to use the
new and current products within a defined market
scenario.
• The products are “defined” using an appropriate
combination of Feature Levels that represent the
products in a scenario.
 The product that has the highest total utility
value based on the Feature Levels used to de-
scribe it is effectively the “WINNING” product
within a scenario.
• A “winning” product within the scenario is deter-
mined for every participant.
 The percentage of “wins” across all partici-
pants for each product is then used to deter-
mine the preference “share” for the product.
 This is called the first-choice model – which is
appropriate for this type of product and market.
❖ (There are also other models used for mar-
ket simulations that are beyond the scope of
this article.)
ATTRIBUTE FEATURE OPTION SUMMARY
= “Ideal” Attribute Features that Maximize “Likelihood to Use” Device
Segment: OVERALL Surgeons
100
0
86
12
78
22
74
55
46
30
44
39
20
30
15
0
20
40
60
80
100
RelativePart-WorthValues Mode of
Entry
into
Abdom-
inal
Wall
Port
Visualization Insufflation
Valve Cannula
Diameter Sizes
Available
Brand Usage Type
Highest
Lowest
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8. 8
evidence that the new products have a very
strong potential to compete quite effectively in
the marketplace.
• As seen in the chart below, the Simulations made
it unmistakably clear that the new features de-
signed into all of the new devices are perceived to
offer true value to surgeons over and above what
they are using now.
And the “Winner” Is ...
Several Market Scenario Simulations were done
to reveal how the various new products would
theoretically match-up within a competitive market
comprised of the devices offered by the two current
major brand players.
• Each Scenario was simulated before and after a
new product “enters” a market. Both Scenarios
show the PREFERENCE “SHARES” of
the products that make up the mar-
ket for the simulation.
• The key question that the Brand
Team wanted to know was:
“Do the new products offer
enough potential value to make
their company a viable new
competitor in the market?”
• The preference “shares” calculated
from the Market Simulations an-
swered that question – quite con-
vincingly for our Client.
Similar analysis was done for the other
three new products.
• All of the results provided conclusive
Conclusions
The findings from the Trade-Off Analysis were
presented to and well received by the Brand
and Marketing Research Teams and Senior Manage-
ment.
This was an exciting and BIG business decision
for Client “A”. However, discretion must be used
when utilizing the results with this type of study at
“face-value”. Some factors that need to be consid-
ered are:
1. All participants had 100% awareness of the new
products in the study. Obviously this will not be the
case in the real world.
 Therefore, the “shares” must be considered a
measure of the inherent potential “share” that
the new products have versus current options.
❖ This is still a very powerful and important
gauge as to whether a new product captures
any relevant interest even among an audience
that is fully aware of the product.
❖ Therefore, a very poor performance in a market
simulation would almost certainly make a “Go/
No Go” decision a definite “No Go”.
2. The study was fielded within the implied context of
an “equal playing field” among the competitors —
i.e., same awareness levels, sales force size, etc.
Therefore it is necessary that commitments to 
 Creating appropriate awareness levels
 Building proper sales force resources
 Crafting effective promotional messages
 Devising effective contracting strategies with
group purchasing organizations (GPOs)
→ are consciously at the forefront of any acquisition
decision. To do anything less, will jeopardize any
realistic chance at succeeding in the marketplace.
The Team acknowledged and appreciated this
added insight!
As a result of their due diligence efforts, of which
the Trade-Off Results were
key components, our Client made
the decision to acquire the
Selling Company and the new
device assets that Surgeons are
eager to learn about and use!
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Brand "R"
Sharp Conical Blade on
Tip
No Add’l Lighting at Tip
Manually Closed
10 mm, 12 mm, and 15
mm
Reusable
64%
36%
“BEFORE” New Brand
“Preference Share” Simulation Results
48%
30%
22%
“AFTER” New Brand in ‘Market’
The New Brand
is expected to
be a
Formidable
New Player
New Brand
Bladeless (no Trocar)
Laser Pointer at Tip
Automatically Closes
5 mm, 10 mm, and 15mm
Disposable
Brand "Q"
Bladeless (no Trocar)
No Add’l Lighting at Tip
Manually Closed
5 mm, 10 mm, and
15mm
Disposable
"The most important thing is predict where clients are going and stop right in front of them”.Philip Kotler —

9. 9
 Measuring the strength and consistency of
‘share’ for your brands across different cus-
tomer segments
❖ “Is the brand strong across the entire market
or mainly with a particular segment or seg-
ments?”
• Identifies the “hot-buttons” of the products or
services so that you can prioritize the features
and benefits to target and communicate more
effectively with your customers.
 Your customers will be happier and more
interested in learning about products or ser-
vices that directly match the desires and
needs they want from a product or service.
• Decreases market research cost in
the long-run. A well designed Trade-Off
Study can be used to answer questions
even after the project is officially complet-
ed.
 The richness and depth of information
that is captured provides the opportunity to
test additional market scenarios as the com-
petitive environment changes since the origi-
nal study was fielded.
• Provides results via a proven tool that has been
used in various forms since the early 1970’s in
Marketing.
 Moreover, the method has been used across
many different industries, product types and
services (e.g., medical products, consumer
goods, legal disputes, hotel services), and with
all different customer types.
Trade-Off (Conjoint Analysis) is a Powerful
and Invaluable method that will help ensure
that business decisions are
backed-up by information that
helps you not only answer to-
day’s questions – but helps you
stay ahead of your competition
by confidently anticipating and
answering questions about the
future, as well. It is definitely worth a “Shot”!
Some Advantages of using Trade-Off Analysis
(i.e., Conjoint Analysis) for a future project are:
• Provides you a more realistic understanding
of the buying-decision framework that your
customers inherently use since it forces partici-
pants to evaluate the products as a whole rather
than focusing on the separate parts or features
(as in real life).
 The “derived” importance of your product’s
Attributes and Levels captured from this meth-
od virtually eliminates any bias
that participants would likely
have when stating and evaluat-
ing the importance of features in
isolation of other features.
• Increases success and helps
reduce risk in the business deci-
sion by:
 Eliminating much of the guess-
work about understanding the
market opportunities and chal-
lenges when evaluating poten-
tial new product offerings.
❖ This increases the chances
for greater success and bottom-line profita-
bility for your product line decisions.
 Assessing the potential of product and service
development ideas before any major production
resources are used.
 Proactively modeling and simulating the dy-
namics of different current and/or future com-
petitive market situations. Example –
❖ “What would happen to my product’s ‘share’ if
a competitor comes out with a product that has
a feature that is similar to my product?”
❖ “What will happen to my product’s ‘share’ if we
can make a particular claim that our competi-
tors cannot?”
❖ “What steps do we need to take in order to
make our products or services more successful
in the market?”
Benefits of Using Trade-Off Analysis for You and Your Team!
Hope you enjoyed this article.
Please feel free to reach out and connect via LinkedIn --
https://www.linkedin.com/in/stevepetitt/ Steve Petitt, MBA
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