What is the optimal price for a product?
In today's environment of globalization and market individualization, this question is becoming harder and harder to answer. Although it was once enough to simply add on an appropriate margin on top of production, sales and distribution costs to determine an effective market price, nowadays this approach is largely impractical. A strict orientation on the competition also fails to yield good results.
Yet price is a very important factor in almost all buying decisions. Concretely, price optimization may be required for determining the price of a new product, for price modifications in the event of product alterations (re-launches), or finding new price levels in order to achieve specific objectives such as e.g. boosting sales or optimizing profitability.
Alongside conjoint measurement, which allows for the analysis of an optimal price against a backdrop of product attributes and competitors, there are also methods whose focus is directed specifically towards price determination. These include:
