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Measuring willingness to pay: do direct methods work for premium durables?

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  • Michael Löffler

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Abstract

Eliciting customers’ willingness to pay (WTP) is a core element of the pricing process. Whereas researchers tend to promote indirect methods, the application of direct methods is reported to prevail in practice. In the last decade, several empirical studies have compared direct and indirect WTP assessments for services or consumer goods. This study addresses premium durables in an international context, based on a qualified sample of 1,650 real customers. Two selected direct and indirect WTP assessment methods are compared in pricing a new product in the USA, Germany and China. A Monte Carlo simulation identifies the significant revenue opportunities missed by applying direct methods of WTP assessment common to most popular business practices. The empirical results clearly support the application of indirect methods, as direct methods are prone to country-specific artefacts and reveal only close to optimal prices in the best case scenario. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Michael Löffler, 2015. "Measuring willingness to pay: do direct methods work for premium durables?," Marketing Letters, Springer, vol. 26(4), pages 535-548, December.
  • Handle: RePEc:kap:mktlet:v:26:y:2015:i:4:p:535-548
    DOI: 10.1007/s11002-014-9291-4
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    File URL: http://hdl.handle.net/10.1007/s11002-014-9291-4
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    References listed on IDEAS

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