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 PRICING PRODUCTS September 2000 Agricultural input suppliers have several pricing research options available to assist them in making pricing decisions. A conjoint based discrete choice method is used to estimate elasticities and cross elasticities. CONJOINT BASED DISCRETE CHOICE Discrete choice pricing research is valuable to agricultural input suppliers because it allows the respondent to see both product and price options. This design allows a marketing manager to play numerous "what if?" scenarios. For example: * What happens if we lower the price of our product 5 percent, and competitive products A and B also lower prices 5 percent, and competitive product C remains unchanged? * What happens if we lower the price of product A 5 percent, and keep prices for product D unchanged? THE APPROACH If a new product is tested, the respondents must have a realistic idea of what the product does. Typically they are given a product description. Respondents are also shown product and pricing alternatives from a deck of cards (ideally less than 18) or a matrix sheet. Through a factorial design, this allows all product/price combinations to be tested, but not by each respondent. The respondent is asked to allocate their current yearís acres across the products and prices. A sample card is shown below. AM Tweet |
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