Are you sure the price is right? (pricing and business strategy)

Citation

Bakken, D.G. (2013), "Are you sure the price is right? (pricing and business strategy)", Strategic Direction, Vol. 29 No. 1. https://doi.org/10.1108/sd.2013.05629aaa.005

Are you sure the price is right? (pricing and business strategy)

Article Type: Abstracts From: Strategic Direction, Volume 29, Issue 1

Bakken D.G.Marketing Research, Summer 2012, Vol. 24 Issue: 2 Start page: 9 No of pages: 6

Stresses that pricing is such a vital aspect of a company’s business strategy that it can single-handedly cause a business to fail if mistakes are made in this area. Reports the results of two experiments conducted to study the willingness of consumers to pay for adult day care (ADC) services, where the first experiment varied the comparison information in a van Westendorp price sensitivity exercise (Price Sensitivity Meter (PSM)) to determine the effect of price range and reference price comparison on willingness to pay for ADC services, and the second experiment studied the effect of price range and reference price comparison on choice-based conjoint estimates of willingness to pay for ADC services. Records that the first experiment lead to the conclusion that the van Westendorp PSM method is unpredictable in that extraneous factors influence the elicited prices, while the second experiment reinforces the researchers’ belief that choice-based pricing models need to incorporate as much realism as possible. Concludes that the researchers’ confidence in their methods is enhanced by an understanding of the potential biases in each method, while knowing the magnitude and direction of these biases allows the researchers to compensate for them in some way, or modify the methods to reduce or eliminate their impact. Article type: Viewpoint ISSN: 1040-8460 Reference: 41AT680

Keywords: Consumer behaviour, Customer requirements, Customer satisfaction, Customers, Managerial strategy, Organizations, Pricing