Aside from yielding higher margins, such higher price points help companies reinforce the message that their new offering provides better quality/more innovative features than the existing ones. Companies would be more confident about setting a higher launch price for the new product, knowing that its target market penetration would be attained at a (near) future date.This is especially important in the first few years of the product launch when majority of the set-up and sales logistical costs are incurred. By applying this pricing research technique and knowing that market adoption will be in phases, companies are in a better position to plan their resources.Adoption shares for the new product decreases over time despite more customers accepting it, likely caused by those customers who would adopt at a later period and have weaker adoption probabilities (vs.
Note that the more widely used share of preference method (or “Logit Rule”) was not used as its results were counter-intuitive.Below is an example of the resulting market adoption for the new product testing different pricing strategies:.This method yields results that follow intuitive expectations – the new product’s adoption share increases as more customers adopt it over time (assuming zero customer churn among the early adopters). In terms of preference shares, the first choice method (or the “Maximum Utility Rule”) was used.In the pricing analysis, individual customer level utilities, not aggregate utilities, were estimated to enable running market simulations by adoption timeline.within the same year as product launch, 1 year after product launch, 2 years after product launch, etc.). Among those interested in the new product, a separate set of questions from the conjoint was asked, dealing with their overall commitment and likely adoption timeline (e.g.Using choice-based conjoint, the questionnaire design and fieldwork followed the established guidelines related to this methodology.
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