Pricing Models in Marketing Research
ABSTRACT
Pricing a product is one of the most important decisions an organization can make. Marketing research has developed several different approaches to price optimization. They include direct methods such as estimation of willingness to pay, indirect methods such as Gabor-Granger and van Westendorp techniques, and product/price mix methods such as various discrete choice models. All of them are widely used in practical marketing research for evaluation of optimal prices for different products and product innovations. This work describes and compares several main of these approaches.
Pricing a product is one of the most important decisions an organization can make. Marketing research has developed several different approaches to price optimization. They include direct methods such as estimation of willingness to pay, indirect methods such as Gabor-Granger and van Westendorp techniques, and product/price mix methods such as various discrete choice models. All of them are widely used in practical marketing research for evaluation of optimal prices for different products and product innovations. This work describes and compares several main of these approaches.
KEYWORDS
Market Research, Price, Revenue, Gabor-Granger Technique, Van Westendorp Price Sensitivity, Discrete Choice Modeling
Market Research, Price, Revenue, Gabor-Granger Technique, Van Westendorp Price Sensitivity, Discrete Choice Modeling
Cite this paper
nullS. Lipovetsky, S. Magnan and A. Zanetti-Polzi, "Pricing Models in Marketing Research," Intelligent Information Management, Vol. 3 No. 5, 2011, pp. 167-174. doi: 10.4236/iim.2011.35020.
nullS. Lipovetsky, S. Magnan and A. Zanetti-Polzi, "Pricing Models in Marketing Research," Intelligent Information Management, Vol. 3 No. 5, 2011, pp. 167-174. doi: 10.4236/iim.2011.35020.
References
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Wildner, “Price is a Hot Issue,” GfK Insite Magazine, No. 3, GfK, 2003, pp. 30-33. [35] S. Lipovetsky, “Van Westendrop Price Sensitivity in Statistical Modeling,” International Journal of Opera- tions and Quantitative Management, Vol. 12, No. 2, 2006, pp. 141-156. [36] K. M. Miller, R. Hofstetter, H. Krohmer and Z. J. Zhang, “How Should Consumers’ Willingness to Pay Be Measured? An Empirical Comparison of State-of-the-Art Approaches,” Journal of Marketing Research, Vol. 48, No. 1, 2011, pp. 172-184. [37] J. M. Henderson and R. E. Quandt, “Microeconomic Theory: A Mathematical Approach,” McGraw-Hill, Auckland, 1980. [38] M. Ben-Akiva and S. R. Lerman, “Discrete Choice Analysis,” MIT Press, Cambridge, 1985. [39] M. Wedel and W. Kamakura, “Market Segmentation: Conceptual and Methodological Foundations,” Kluwer Academic Publishers, Dordrecht, 1999. [40] J. J. Louviere, D. A. Hensher and J. 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[1] C. W. J. Granger, “Autobiography,” 2003. http://nobelprize.org/nobel_prizes/economics/laureates/2003/granger-autobio.html [2] A Gabor and C. W. J. Granger, “On the Price Consciousness of Consumers,” Applied Statistics, Vol. 10, No. 3, 1961, pp. 170-188. doi:10.2307/2985208 [3] A. Gabor and C. W. J. Granger, “Price Sensitivity of the Consumer,” Journal of Advertising Research, Vol. 4, No. 4, 1964, pp. 40-44. [4] A. Gabor and C. W. J. Granger, “The Pricing of New Products,” Scientific Business, Vol. 3, August 1965, pp. 3-12. [5] A. Gabor and C. W. J. Granger, “Price as an Indicator of Quality: Report on an Enquiry,” Economica, Vol. 33, No. 129, 1966, pp. 43-70. doi:10.2307/2552272 [6] A. Gabor and C. W. J. Granger, “Price Sensitivity of the Consumer,” In: K. Cox, Ed., Readings in the Marketing Research, Appleton-Century Crofts, New York, 1967. [7] A. Gabor and C. W. J. Granger, “The Attitude of the Consumer to Prices,” In: B. Taylor and G. Wills, Eds., Pricing Strategy, Staples Press, London, 1969, pp. 132- 151. [8] A. P. Sowter, A. Gabor and C. W. J. Granger, “The Influence of Price Differences on Brand Shares and Switching,” European Journal of Marketing, Vol. 3, No. 4, 1969, pp. 223-230. [9] A. Gabor, C. W. J. Granger and A. P. Sowter, “Real and Hypothetical Shop Situations in Market Research,” Journal of Marketing Research, Vol. 7, No. 3, 1970, pp. 355-359. doi:10.2307/3150294 [10] A. P. Sowter, A. Gabor and C. W. J. Granger, “The Effect of Price on Choice: A Theoretical and Empirical Inves- tigation,” Applied Economics, Vol. 3, No. 3, 1971, pp. 167-181. doi:10.1080/00036847100000002 [11] A. Gabor, C. W. J. Granger and A. P. Sowter, “Com- ments on ‘Psychophysics of Prices’,” Journal of Mar- keting Research, Vol. 8, No. 2, 1971, pp. 251-252. doi:10.2307/3149773 [12] C. W. J. Granger and A. Billson, “Consumer’ Attitudes toward Package Size and Price,” Journal of Marketing Research, Vol. 9, No. 3, 1972, pp. 239-248. doi:10.2307/3149533 [13] A. Billson, A. Gabor, C. W. J. Granger and A. P. Sowter, “Decimalisation and the Consumer,” Consumer Study Group, University of Nottingham, October 1972. [14] A. Gabor and C. W. J. Granger, “Ownership and Ac- quisition of Consumer Durables,” European Journal of Marketing Vol. 6, No. 4, 1972, pp. 234-248. [15] A. Gabor and C. W. J. Granger, “A Systematic Approach to Effective Pricing,” In: L. W. Rodger, Ed., Marketing Concepts and Strategies in the Next Decade, Cassell/ Associated Business Programmes, London, 1973, pp. 171-194. [16] A. Gabor and C. W. J. Granger, Selected papers in: Management Decision (Archive), Vol. 17, No. 8, 1979, pp. 528-812. http://www.emeraldinsight.com/journals.htm?issn=0025-1747&volume=17&issue=8 [17] A. Gabor and C. W. J. Granger, “Pricing: Principles and Practices,” Heinemann Educational, London, 1977. [18] T. Scitovsky, “Some Consequences of the Habit of Judging Quality by the Price,” Review of Economic Studies, Vol. 12, No. 2, 1944, pp. 100-105. doi:10.2307/2296093 [19] J. Stoetzel, “La Prix Comme Limité,” In: P. L. Reynaud, Ed., La Psychologie Economique, Librairie Marcel Riviere et Cie, Paris, 1954, pp. 183-188. [20] D. Adam, “Les Réactions du Consommateur devant le Prix,” Socie?te? d’E?tudes pour le De?veloppement E?cono- mique et Social (SEDES), Paris, 1958. [21] P. Fouilhé, “Evaluation Subjective des Prix,” Revue Francais de Sociologie, Vol. 1, No. 1-2, 1960, pp. 163-172. [22] B. Taylor and G. Wills, “Pricing Strategy,” Staples Press, London, 1969. [23] R. D. Luce and H. Raiffa, “Games and Decisions,” Wiley, New York, 1958. [24] P. H van Westendorp, “NSS Price Sensitivity Meter (PSM)—A New Approach to study Consumer-Perception of Prices,” Proceedings of the 29th ESOMAR Congress, Venice, 5-9 September 1976, pp. 139-167. [25] A. R. Rao and M. E. Bergen, “Price Premium Variations as a Consequence of Buyers’ Lack of Information,” Journal of Consumer Research, Vol. 19, No. 3, 1992, pp. 412-423. doi:10.1086/209311 [26] T. T. Nagle and R. K. Holden, “The Strategy and Tactics of Pricing: A Guide of Profitable Decision Making,” 2nd Edition, Prentice-Hall, Englewood Cliffs, 1995. [27] G. W. Cermak, “Budget Allocation as a Measure of Potential Demand,” Journal of Economic Psychology, Vol. 17, No. 5, 1996, pp. 591-613. doi:10.1016/S0167-4870(96)00026-8 [28] A. Tishler and S. Lipovetsky, “The Flexible CES-GBC Family of Cost Functions: Derivation and Application,” The Review of Economics and Statistics, Vol. 79, No. 4, 1997, pp. 638-646. doi:10.1162/003465397557042 [29] A. Tishler and S. Lipovetsky, “A Globally Concave, Monotone and Flexible Cost Function: Derivation and Application,” Applied Stochastic Models in Business and Industry, Vol. 16, No. 4, 2000, pp. 279-296. doi:10.1002/1526-4025(200010/12)16:4<279::AID-ASMB419>3.0.CO;2-0 [30] R. Wildner and M. Conklin, “Price Thresholds and Prospect Theory,” The 12th Annual Advanced Research Techniques Forum of the American Marketing Association, Monterey, 3 June 2003, pp. 55-60. [31] C. Blamires, “Pricing Research Techniques: A Review and a New Approach,” Journal of the Market Research Society, Vol. 23, No. 3, 1981, pp. 103-126. [32] C. Greenhalgh, “Research for New Product Development,” In: R. M. Worcester and J. Downham, Eds., Consumer Market Research Handbook, 3rd Edition, Mc- Graw-Hill, London, 1986, pp. 426-469. [33] P. Comley, “What do We Know about Pricing Research,” World Advertising Research Center (WARC), January 1997, pp. 11-13. [34] R. Wildner, “Price is a Hot Issue,” GfK Insite Magazine, No. 3, GfK, 2003, pp. 30-33. [35] S. Lipovetsky, “Van Westendrop Price Sensitivity in Statistical Modeling,” International Journal of Opera- tions and Quantitative Management, Vol. 12, No. 2, 2006, pp. 141-156. [36] K. M. Miller, R. Hofstetter, H. Krohmer and Z. J. Zhang, “How Should Consumers’ Willingness to Pay Be Measured? An Empirical Comparison of State-of-the-Art Approaches,” Journal of Marketing Research, Vol. 48, No. 1, 2011, pp. 172-184. [37] J. M. Henderson and R. E. Quandt, “Microeconomic Theory: A Mathematical Approach,” McGraw-Hill, Auckland, 1980. [38] M. Ben-Akiva and S. R. Lerman, “Discrete Choice Analysis,” MIT Press, Cambridge, 1985. [39] M. Wedel and W. Kamakura, “Market Segmentation: Conceptual and Methodological Foundations,” Kluwer Academic Publishers, Dordrecht, 1999. [40] J. J. Louviere, D. A. Hensher and J. Swait, “Stated Choice Methods: Analysis and Applications,” Cambridge University Press, Cambridge, 2000. [41] K. Train, “Discrete Choice Methods with Simulation,” Cambridge University Press, New York, 2003. doi:10.1017/CBO9780511753930 [42] D. McFadden, “Economic Choices,” Nobel lecture on the microeconometric analysis of choice behavior of con- sumers who face discrete economic alternatives, 2000. http://emlab.berkeley.edu/pub/users/mcfadden/nobel/final-nobel.pdf [43] S. Lipovetsky, “Conditional and multinomial logits as binary logit regressions,” Advances in Adaptive Data Analysis, Vol. 3, No. 1, 2011, pp. 1-16.