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Value-based pricing in competitive situations with the help of multi-product price response maps

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>07/2017
<mark>Journal</mark>Journal of Business Research
Volume76
Number of pages18
Pages (from-to)219-236
Publication statusPublished
Early online date11/01/17
Original languageEnglish

Abstract

This article introduces multi-product price response maps for various value pricing applications in competitive situations. The maps are based on the direct elicitation of individual willingness to pay (WTP) as a range for competing products; they reveal an individual's or market's choice probability for a focal product, at its own and competing products' prices. Transforming the price response into profit, revenue, or unit sold maps supports optimal pricing decisions. The maps are also useful for optimizing profit differences from the closest competitor and for portfolio pricing. Managers can use a consumer indecisiveness map, gained from the WTP range data, to devise complementary marketing measures at prices where consumer uncertainty is high. The illustration of this approach uses two empirical examples, featuring two or more competing consumer goods, and demonstrates the predictive and external validity of these proposed maps.