Attribute Trade-offs

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Do curso por University of Virginia

Pricing Strategy in Practice

46 ratings

University of Virginia

Pricing Strategy in Practice

46 ratings

Curso 4 de 4 em Specialization Pricing Strategy Optimization

In this project-centered course, Darden's Ron Wilcox and BCG's Thomas Kohler will walk you through a real-world case, from problem statement to detailed analyses. You'll use all three lenses (cost, customer value, and competition) to recommend an optimal price—and then adjust to market disruptions. Utilizing the concepts, tools and techniques taught in previous Specialization courses—from basic techniques of economics to knowledge of customer segments, willingness to pay, and customer decision making to analysis of market prices, share, and industry dynamics—you will practice setting profit maximizing prices to improve price realization. You'll finish the course with a portfolio-building project that demonstrates your pricing prowess.

Na lição

Customer Value and Conjoint Analysis

This week, we will dig deeper into customer value using conjoint analysis to determine the price sensitivity of consumers and businesses. Thomas and Ron will show you how to graph the conjoint data to easily compare these two markets--and you'll do additional analysis of the conjoint data to learn more about what consumers value. Using your analysis, you'll hone your pricing recommendation.

Conjoint Analysis: Steps 1 – 38:01

Conjoint Analysis: Step 4 and Product Preferences7:24

Attribute Trade-offs2:45

Attribute Importances4:03

Conjoint Analysis: Willingness to Pay5:38

Conheça os instrutores

Jean Manuel Izaret
Senior Partner and Managing Director, Leader of BCG’s Global Pricing Practice
Ronald T. Wilcox
NewMarket Corporation Professor of Business Administration & Senior Associate Dean for Degree Programs
Marketing
Thomas Kohler
Associate Director, Pricing
Marketing, Sales & Pricing Practice

So we just discussed using conjoint analysis

to determine which products the people like, and

whether different segments might like different products from each other.

We can also use conjoint analysis to analyze the trade-offs

that people are willing to make among the different attributes.

Let's consider the example that I have on the screen in front of me.

We have a golf ball, it's Magnum Force that equals 0.43.

Now recall where I get that, I get that from the data, all right?

So if you look at Magnum Force and over in the effect column it says 0.429.

So I'm rounding that to 0.43.

And then it goes 10 yards further than the average ball, that is 0.12.

And it's currently priced at 6.99 per pack, and that is,

if you look down at 6.99, 0.216 or 0.22.

To get the overall utility of the product, I simply add those together and

that equals 0.77.

Suppose I were to ask the question,

would the average golfer rather have a ball that drives an additional 5 yards.

So that would be going from 10 yards further to 15 yards further, or

a price reduction to $4.99 a pack.

Here's how I do that.

First, I look at the utility associated with the 10 yards further and

the 15 yards further.

And if you look at your data that equals 0.12,

and the 15 yards further is 0.36.

I'm then going to compare that difference.

That's that additional happiness a person gets from the ball going a little bit

further to the happiness that they would get if we reduce the price by $2.

In order to calculate that, I'm going to look at $6.99 a pack,

which is 0.22, and then if we drop it to $4.99 a pack,

that's going to equal 0.696 or about 0.70.

What I then do is look at which difference is larger.

And in this case, this is the larger difference, the 0.70- 0.22.

In fact, it's twice as big as this difference.

And recall, this first difference, 0.70- 0.22,

is coming from the spread of the utilities of the effects from the price attribute.

So what we can say is most golfers would prefer a $2 decrease in

the price relative to a ball that goes a little farther.

And again, I'll just emphasize that in each of these examples I give you,

you can calculate this at the population level and you can also calculate it for

different segments you might be interested in.

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