Marketing in Analytics? Analytics in Marketing? :P
“How much are you willing to pay for a product and what are you willing to trade off”
Conjoint pricing is a very innovative marketing strategy because it segregates the functionalities, the utility as well as the price and attributes for the different consumers in the market. It does not particularly focus just on the price or just on the features, it rather focuses on what a consumer is willing to let go to for getting something else...for e.g. if a customer is willing to pay Rs 10,000 more for a laptop which has a better battery life then he is trading off on the price of the laptop. He could have spent Rs 10000 less to get a laptop if he didn’t bother about the good battery life.
So basically, conjoint pricing is a bracket or range of offerings what you are willing to pay for.
Let’s look at an example to understand this further...
Sony Bravia is a premium TV brand. There are so many features that you get- but the question is how much do you feel is the utility of all those features...
Let’s say you don’t want to pay for a feature that the company is offering to you, but at the same time you get other features which you definitely want in the product...hence you are looking at the utility that the product brings to you and this is because different features are looked at by different kinds of customers...
Here we have a TV which offers all this features and functionalities, and can combine these features into several groups depending on the demand criteria by the different types of customers...we can actually focus on just the size, slim, colour and pixels for customers who are more concerned about the “looks” of the television. Like this we can make several other groups and develop ad campaigns and promotional events that could be targeted at those specific utility quotients perceived by those segments of customers.
This method is very useful as it focuses on the different consumer segments more accurately and more effectively. As the people are paying for the product which is giving them the best utility according to them and not confusing them with too much information not valued by them.