WTP-measurements and robustness of preference

orders based on competitive designs such as the

brand-price-trade-off approach or choice based
conjoint analysis
AIM
To analyze how the willingness to pay (WTP) and robustness of preference orders based on

competitive designs such as the brand-price-trade-off (BPTO) approach or choice based conjoint

analysis which has been neglected in recent pricing research.

In this paper, the preference reversal phenomenon known from risk research will be investigated

in competitive decisions environment where in we want to know how the participant behave

with higher valuations in terms of a cash equivalent (CE) or a willingness to pay (WTP).

For conducting this research, we will start at first, to know what is the participants preference

order of alternatives when we give them a competitive environment with similar products of

same price and then we will go for comparing in different price environment. Over here we will

give participants a choice of tasks between product offered at different prices and in some case

a no-buy option. For doing so, we will apply framing that adapts the natural consumer

environments in terms of binding decisions between real products in the laboratory environment

and also, conducted in a field survey at the point of purchase.

METHODOLOGY

We intend to conduct a study in which we will ask the participants a series of questions regarding

their willingness to pay on select products between opposing consumer brands among different

categories. This series of questions would be a list of multiple choice questions in which we will

show a particular brand of a given product and ask the participant to select the most likely price

they would be willing to pay for that brand of product out of a set choice of prices. They will be
asked to perform this task multiple time for the same product and for multiple product types and

opposing brands. Each repeat question will contain a different set of answers for prices.

Once this series of questions has been performed and answered by the participant they will be

asked to answer another series of questions, this time with both brands presented for each

question. Under these circumstances the participant will now have to select the price they would

be willing to pay for a particular brand when they have a choice between that brand and the

opposing brand when the opposing brand is held at a constant price. The participant will, again,

be asked to answer this question multiple times over a different set of prices each time while the

opposing brands price is the same in every question. From this we can derive the participant

willingness to pay based on conjoint analysis. It is likely at this point that we will be able to

demonstrate the measurement and robustness of preference orders and reversals when given a

set of mutually exclusive products/brands and then when considering them together.

A number of participants between 50 and 100 participants should be adequate for this study. In

conducting the research, we will want to administer these questions in a questionnaire fashion

and in a controlled environment such as a laboratory or a test room. We plan to obtain each one

of the products in two opposing brands and display them to the participant as we are asking them

questions. The necessary software that will be required will most likely just be a computer as

most of the study will consist of asking the participant this series of questions on a computer

screen and should be a rather straightforward procedure.

Resources that will be required for this survey will be the participants themselves, a test

administrator, the computer, paper, and pens/pencils to record answers. The control
environment will have to be a quiet place such as the previously mentioned laboratory or test

room and the interviewee will observe the test on the computer screen and use the paper and

pen/pencil to jot down the answers.

A major barrier or pitfall within this research study will be that we will have to address memory

based decision making that typically occurs in these sort of experiments. According to Park and

Hastak a good way to combat this is to ask the participants several other questions while asking

them about the different products and brands such as their purchase likelihoods, cost

consciousness, and more brand specific questions. Another such barrier is that there may be

starting point bias, which can be combatted by selecting the choices of the sums of money at

random. A third barrier in this project might be the cost. It is estimated that the average interview

survey of this sample size can cost between $20,000 and $50,000. A fourth barrier is that the

participants may be biased due to income levels or preexisting brand preferences. Lastly, a major

pitfall to this study is that we will not get to observe the participants real life buying experience

or in-store decision making process as we will be giving these questionnaires in a controlled

environment.

This will be a relatively straightforward and not really revolve around animal ethics, safety or

human ethics hence, this project doesnt require any involvement as such.

Some travel and fieldwork will be required while conducting this project. One will most likely

need to travel to collect and purchase the survey items and to the interview site to help with

overseeing the project and possibly observe the experiments being conducted.
Also most of the data are accessible in internet and rest we can get from previous research

papers, and some from few textbooks which can be access from the university library.

EXPECTED OUTCOMES, SIGNIFICANCE OR RATIONALE

The proposed study will help determine the competitive contexts among products and project

the order of preference among them. Conjoint analysis will not only be used to determine how

good the product is, but which product is best under a given a set of choices. The controlled

experiment will aid in making better pricing decisions, the repositioning of a product, and save

on research and development costs. Analyzing choices instead of ratings is beneficial because

choices are an integral part of peoples everyday life and are natural manifestations of a

persons preference (Eggers). By using choice tasks with different alternatives to choose from,

where consumers need to make tradeoffs in order to decide. Utilizing multiple choice studies for

determining the willingness to pay of individuals will help determine the true value of a particular

brand, and if a tradeoff is beneficial.

Our methodology will help determine the relative value of one product over opposing consumer

brands. A ranking of preference will be obtained based on our results relating brand to price that

individuals are willing to pay. It is expected for popular brands to command premium prices or

premium market share over opposing consumer brands. The effects of a brand may be largely

influenced by the familiarity and quality of the product, the companys reputation, and feedback

from peers. These are some of the characteristics that will affect the impact of price and the

consumers willingness to pay on select products between opposing brands among separate

categories. It can be expected luxury brands will have a much higher price among other opposing

brands because of their popularity and reputation amongst the industry. For example, an Apple
computer versus an Acer. Apple products will carry a higher price because of their brand loyalty

and recognition amongst the market of computers. The findings from our study can also be used

to make approximate predictions to estimate new product success in a given market (Aggers).

We will be able to gain insight into the effects of varying price points on purchase behavior. It

can be assumed more luxurious brands will have a higher price point, than lower quality brands.

However, store brands provide value for money to customers and higher margin to retailers. Our

study will help determine the category specific factors which affect the consumer preference for

private labels versus national brands (Vakhariya, Shital, and Vilas Chopde, 2011). We will also be

able to determine the true value of a brand in comparison to opposing consumer brands.

Our study is important because it is a way to quantify consumer values associated with different

product attributes. Participants compare products to establish preferences and can then explain

the importance of different attributes. We will be able to use the data in order to obtain objective

insight into consumers using a quantifiable and repeatable approach. The study will be both

efficient and flexible with our current design. Companies will be able to better determine

effective price points for their brands, and most importantly, what consumers want and what

factors or attributes effect their behavior.

REFERENCES
Bazerman, M. H., Moore, D. A., Tenbrunsel, A. E., Wade-Benzoni, K. E., & Blount, S. (1999).
Explaining how preferences change across joint versus separate evaluation. Journal of
Economic Behavior & Organization
Blackston, Max. "Price Trade-Offs as A Measure of Brand Value." Journal of Advertising
Research 30.4 (1990): RC-3-RC-6. Business Source Complete. Web. 23 Nov. 2016.
Cox, J. C., & Grether, D. M. (1996). The preference reversal phenomenon: Response mode,
markets and incentives
Eggers, Fabian, Felix Eggers, and Sascha Kraus. "Entrepreneurial Branding: Measuring
Consumer Preferences Through Choice-Based Conjoint Analysis." International
Entrepreneurship and Management Journal 12.2 (2016): 427-444. EconLit. Web. 23 Nov.
2016
Frykblom, P. (2000). Willingness to pay and the choice of question format: experimental
results
Kalish, S., & Nelson, P. (1991). A Comparison of Ranking, Rating and Reservation Price
Measurement in Conjoint Analysis. Marketing Letters
Karni, E., & Safra, Z. (1987). "Preference Reversal" and the observability of preferences by
experimental methods. Econometrica
Noussair, C., Robin, S., & Ruffieux, B. (2004), Revealing consumers' willingness-to-pay: A
comparison of the BDM mechanism and the Vickrey auction
Park, J., & Hastak, M. (1994). Memory-Based Product Judgments: Effects of Involvement
at Encoding and Retrieval. Journal of Consumer Research
Rao, Vithala R. Applied Conjoint Analysis. n.p.: Berlin: Springer, [2014], 2014. UNF eBook
Collection. Web. 23 Nov. 2016.
"Trade Off Analysis | Marketing Research Association." Trade Off Analysis | Marketing
Research Association. N.p., 2016. Web. 23 Nov. 2016
Tversky, A., Slovic, P., & Kahneman, D. (1990). The causes of preference reversal.
American Economic Review
 Tversky, A., & Thaler, R. H. (1990). Anomalies: Preference Reversals. The Journal of
Economic Perspectives
Vakhariya, Shital, and Vilas Chopde. "A Study of the Consumer Preference of Private
Labels Over National Labels In Apparel Segment Of The Departmental Stores In Nagpur
Region." International Journal of Research in Finance and Marketing 1.1 (2011): 1-13.
EconLit. Web. 23 Nov. 2016.
Voelckner, F. (2006). An empirical comparison of methods for measuring consumers
willingness to pay. Marketing Letters
Voelckner, F., & Hofmann, J. (2007). The price-perceived quality relationship: A meta-
analytic review and assessment of its determinants. Marketing Letters