Using Coinjoint Analysis to Capture Differences in Consumers' Responses to Price of Competing Brands

Ron Ventura, 2002

This research concerns the role of price in influencing a consumer's choice between brands. A difficulty in predicting response to price arises because under conditions of incomplete knowledge consumers may use price as a cue for quality in addition to the cost meaning of price. The brand-price interplay is investigated in the current research through a new conjoint analysis model that is cross-analysed by consumers' prior knowledge, linking the two important domains of preference and knowledge in the discipline of consumer choice behaviour.   The research included three stages: a conjoint pilot study, a pre-test of knowledge and other behavioural scales, and a main survey incorporating conjoint modelling with related constructs of consumer choice behaviour. The conjoint design comprised brand name, price and a new marketing concept. The principal analysis is based on data collected from a sample of 244 student respondents in North-West England using sports footwear. The conjoint model is unique in its specification of response to price of competing brands, including a new behaviourally-oriented model of response to price, integrated with latent class segmentation.

It is argued that the non-linear Inverse-Price-Effects model proposed in this research is more flexible than traditional forms (e.g. additive quadratic price model) when capturing the use of price as a quality cue, primarily suggesting that an “ideal-price” is not static. Four patterns of response to brand-price offers representing low, medium and high degrees of brand-price interrelations are identified, which in particular distinguish between the use of price as a warning signal against buying too-low quality at too-low prices and as a summary of brand-price expectations. While the findings are consistent with the economic view that price functions primarily as a sacrifice in consumer preferences, they also indicate that the use of price as a quality cue is not exceptional or negligible. The informative role of price can have a strong impact on consumers' response patterns, inducing them to pay higher prices.  Furthermore, the reliance of consumers on the quality meaning of price appears to depend on their ability to distinguish between brands and their familiarity with particular brands. The research reveals an association between the response patterns of consumers with their prior knowledge – objective and subjective – of the product category concerned. Hence, the degree of brand-price interplay is influenced by prior product knowledge and proneness to rely on price as a quality cue.