How to Price a Product Feature

Exhibit 16.12   Conjoint analysis reveals that Pantene priced USD 10 has the same utility as Pantene HFC priced USD 12.50.

Consider this scenario — Pantene shampoo wants to launch a new variant with hair fall control (HFC) properties. How much premium may be charged for this additional feature?

Take another example, Kunst, a vacuum pump, boasts a distinct advantage over its competitors — it does not require periodic oil changes like other vacuum pumps. What is the perceived value of this feature?

The second scenario is discussed in Section Value Assessment (Exhibit 6.16), in Chapter Customer Satisfaction and Customer Value.

As for Pantene, according to the brand’s website, the Hair Fall Control variant contains keratin damage blockers that helps prevent hair breakage caused by damage, resulting in up to 98% less hair fall when used daily. This sounds like something that consumers may be willing to pay more for, and conjoint analysis can be used to estimate the price premium to charge for benefit of HFC ingredients.

The price premium is determined by trading the HFC benefit for price, as depicted in Exhibit 16.12. According to the exhibit, profile C with HFC, priced USD 12.50 has the same utility as profile A, Pantene sans HFC priced USD 10.00. We can infer that the premium that an average consumer is willing to pay for HFC is USD 2.50.

Attributes	Levels	Part-Worth	Importance	Relative Importance %
HFC	No	-0.6	1.2	10
	Yes	0.6
Price (USD)	18	-2.4	4.8	40
	8	2.4

The product profiles depicted in Exhibit 16.12 are derived from the conjoined analysis results presented in Exhibit 16.13. The part-worth for price ranges from –2.4 at USD 18.00 to +2.4 at USD 8.00, a span of 4.8, which is 4 times greater than that for HFC (1.2).

Assuming a linear utility relationship for price, the results indicate that the perceived value of HFC is one-fourth of the perceived value of price across the range USD 18.00 to USD 8.00. One may conclude that the premium for HFC is (18.00 – 8.00)/4 = USD 2.50.

For this type of research, it is important to remember that markets are heterogeneous; not all consumers are interested in a shampoo with HFC properties. Therefore, to avoid underestimating the premium for HFC, the study should target only those respondents who are interested in reducing hair fall.
Fatal error: Uncaught Error: Undefined constant "pr" in /var/www/html/Marketing-Analytics/~pr-pricing-product-feature.php:58 Stack trace: #0 {main} thrown in /var/www/html/Marketing-Analytics/~pr-pricing-product-feature.php on line 58