Pricing of experience products under consumer heterogeneity

Atanu Adhikari, Amiya Basu, S. P. Raj

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

An experience is designed to engage the customer and leave a lasting memory. While experience is relevant to a broad array of marketing situations including retailing, leisure, entertainment, and hospitality industries, no prior studies could be located that have assessed the values of experience components to customers, and the pricing implications of such assessments. This study illustrates how an experience offering can be designed and priced using the context of the upscale dining experience. Choice-based conjoint analysis and a hierarchical Bayes methodology are used. A cluster analysis of the part-worth scores reveals three very distinct benefit segments. This study shows how a marketer can: (1) Design and price experience products to match the needs of the different benefit segments. This study also shows how to find optimum price for maximization of revenue and profit. (2) Examine how a product would perform against known competitors, and the potential impact of new competitive entries. (3) Determine own and cross-price elasticities of demand to assess resiliency in the face of price competition.

Original languageEnglish (US)
Pages (from-to)6-18
Number of pages13
JournalInternational Journal of Hospitality Management
Volume33
Issue number1
DOIs
StatePublished - Jun 1 2013

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Keywords

  • Conjoint analysis
  • Experience product
  • Hospitality industry
  • Pricing

ASJC Scopus subject areas

  • Tourism, Leisure and Hospitality Management
  • Strategy and Management

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