Journal article
Consumer Preferences and Product-Line Pricing Strategies: An Empirical Analysis
Marketing science (Providence, R.I.), v 25(2), pp 164-174
01 Mar 2006
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Firms often differentiate their product lines vertically to capture consumers’ differential willingness to pay for quality. Additionally, many firms offer products varying not in quality but in characteristics such as scent, color, or flavor, that relate to horizontal differentiation. For example, in the yogurt category, each manufacturer carries several product lines differing in quality and price, but within each line there is an assortment of flavors that is uniformly priced. To better understand these product-line pricing strategies, we address two key issues. First, how do consumers perceive product-line and flavor attributes? Second, given consumers’ preferences, is the current strategy of pricing product lines differently, but offering all flavors within a product line at the same price, optimal? We find that consumers value line attributes more than flavor attributes. Our analysis reveals that firms exploit these differences in consumer preferences by using product lines as a price discrimination tool. However, firms’ profits would not significantly increase if they were to price flavors within a product line differently. Therefore, the current pricing policy of setting different prices for product lines, but uniform prices for all flavors within a line, appears to be on target.
Metrics
Details
- Title
- Consumer Preferences and Product-Line Pricing Strategies: An Empirical Analysis
- Creators
- Michaela Draganska - Stanford UniversityDipak C. Jain - Northwestern University
- Publication Details
- Marketing science (Providence, R.I.), v 25(2), pp 164-174
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Marketing
- Web of Science ID
- WOS:000237158700005
- Scopus ID
- 2-s2.0-33646352464
- Other Identifier
- 991021810268704721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Business