Product and Service Innovation Conference (PSI)

We will be presenting our paper “Measuring Consumers’ Willingness to Pay: Do Direct Approaches Really Work?” at the 8th annual Product and Service Innovation Conference in Park City, Utah. Co-authors are Harley Krohmer from the University of Bern in Switzerland and John Zhang from the Wharton School at the University of Pennsylvania. The conference will take place from February 3rd to 5th, 2011. Hope to see you there!

Article “How Should Consumers’ Willingness to Pay Be Measured?” now published in the February issue of the Journal of Markting Research (JMR)

To make many marketing decisions in an informed way, such as formulating competitive strategies, conducting value audits, developing new products, and implementing various pricing tactics, firms need to accurately gauge consumer willingness to pay. However, to perform this task, marketing researchers face a plethora of approaches that differ in complexity, implementation costs, and accuracy. In this study, the authors facilitate a marketing researcher’s choice by investigating the performance of four commonly used approaches to real purchase data (REAL): the open-ended (OE) question format, choice-based conjoint (CBC) analysis, the Becker, DeGroot, and Marschak’s (BDM) incentive-compatible mechanism, and incentive-aligned choice-based conjoint (ICBC) analysis. With this five-in-one approach, the authors test the relative strengths of the four measurement methods, using REAL as the benchmark, on the basis of statistical criteria as well as decision-relevant metrics.

The results indicate that the BDM mechanism and ICBC can pass statistical and decision-oriented tests. The authors find respondents to be more price sensitive in incentive-aligned settings than in non-incentive-aligned settings and the real purchase setting. The study also uncovers an intriguing possibility: Even when the OE and CBC generate hypothetical bias, they may still lead to the right demand curves and right pricing decisions.

Executive Summary and Author Bio’s

Full Text

Web Appendix

Table of Contents JMR February Issue