Value pricing through conjoint measurement: A practical approach

Pricing based on marginal costs misses a critical element in maximising profits -- the relative perceived value of the product which is being priced. In practice, managers use crude proxies. A more sophisticated and valid pricing method, which uses perceived relative value of products is Conjoint Measurement. It is explained here by Eckhard Kucher and Klaus Hilleke, and is a very effective tool when determining the value of a product and deriving price response functions and profit optimal prices. The authors chart three key elements in pricing studies using Conjoint Measurement, and expect the method to gain rapid acceptance by European managers.