“If you have to ask how much it costs, you can’t afford it.” (John Pierpont Morgan)
The customer’s perception of value is the ultimate arbiter of price. It needs to be measured carefully. Generally, managers can estimate willingness-to-pay from past or real-time market transactions, or from surveys or experiments that depict hypothetical purchases. All else equal, the manager prefers the first approach because it is consequential—lying to the researcher is costly. But reality forces trade-offs. For example, gathering information on market transactions can burn precious resources, and the data may be noisy. This session provides a critical overview of the manager’s toolbox, discuss the merits of the more popular methods and acknowledge the obstacles that are likely to surface when data are translated into practical insights.