Abstract:

Due to accelerating technological developments products can be rigged with a range of new features, functions and product claims. In view of these opportunities the strategic pricing question discussed in this paper reads as follows: "Which combination of products has to be offered when, where, and at what price range, in order to realize the full profit potential?". Conjoint analysis is a very appropriate method to measure price sensitivities in case of multi-attribute products. This paper discusses the merits and demerits of four trade-off techniques for the measurement of price sensitivity, viz.: A. The price(s) of the products are specified as an attribute of the product. 1. Using absolute prices (for instance $ 2000; $ 2500; $ 3000; etc.). 2. Using respondent specific prices (base price + $ 500; or + 5%, etc.). B. The attributes are priced separately. 1. Each attribute is priced separately at various levels, priced attributes are traded off. 2. Each attribute is priced separately at various levels and the products traded off are priced as the sum total of the prices of the attributes. Depending on the number of attributes and on the stage of the strategic pricing process, the researcher can use one of these four conjoint analysis techniques. Within their limitations all four models generate data to measure price sensitivity. Applied on their own, but especially in combination with other research techniques, they are tools that help the marketer analyse which product differentiations will pay and will help realize better prices.