BlueSky Thinking Summary

Derek Rucker and Eric Anderson, along with Sharlene He, take on one of the major challenges in marketing: how to precisely measure the willingness of consumers to pay.

The traditional approaches clearly ignore many critical elements that have context and competition creating misleading prices that will yield managers.

Their work proposes a novel approach called a Comparative Method of Valuation, where comparative options of consumers are basically ushered into the process of value evaluation.

By combining elements of the Becker-DeGroot-Marschak method with careful concern for which realistic alternatives consumers personally consider, CMV is able to provide a more valid and reliable measure of WTP.

It accomplishes this through empirical validation across several studies.

By identifying what consumers would choose instead if not purchasing the target product, CMV enhances accuracy in pricing strategies.

One such approach outclasses the traditional modelling techniques, like the last-click and conjoint analysis, for flexibly adjusting to the different market scenarios and providing an effective practical tool to marketers for optimization of price points and understanding of competitive dynamics.

It is, in sum, a fundamental improvement in the search for more accurate and insightful measurements of WTP in marketing practice.