The price is right

By Alejandro Requejo via   Article

Is The Price Right?

“Businesses often must set prices and forecast demand without a shred of historical data or relevant comparables — in everything from consumer goods in emerging markets to innovative high-tech products for global markets. …

Because of its speed and low cost, one of the most common research techniques that companies use is contingent valuation. … researchers simply ask customers what they would be willing to pay based on a detailed product description and/or list of features.

The results, however, assume that customers know what they are willing to pay for a product absent any comparables or other context. But customers often don’t know. …

In this article, we look at how discrete choice analysis can address two common high-stakes pricing decisions.

Understanding context is critical. … For instance, consumers may say they value a certain feature of a pain killer such as how quickly it takes effect or its lack of side effects. But the equation can change completely when the context moves from a simple headache to severe arthritis.

By the same token, customers may be very enthused about new features in a smartphone but balk at the time of purchase when they discover the company doesn’t provide temporary replacements when the phone needs servicing.

In order to reliably discover what a customer is willing to pay, the research must simulate customer decisions in the context customers make them.”


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: