Product design: A pricing framework accounting for product quality and consumer awareness

Abstract

A systematic framework has been developed to determine the optimal price of a completely new (or existing but improved) chemical product that is being launched (or relaunched) in the presence of a competing product. It has four elements. The first is a pricing model derived from a utility function with constant elasticity of substitution. It accounts for consumers' awareness of the product under consideration and consumer preferences. The second is a set of relationships relating the consumer preferences and the relevant sales data available to a relaunched product to the parameters of the pricing model. In the absence of sales data for a completely new product, the third element is a set of heuristics for choosing a pricing strategy and estimates of the pricing model parameters. The optimal price is finally determined in a profit maximization problem subject to the market size as well as any other constraints. This pricing framework allows simultaneous optimization of product quality and price using product specifications as design variables. It is illustrated with an example on energy drinks. © 2018 American Institute of Chemical Engineers AIChE J, 64: 2462–2471, 2018

Triggers for chemical product design: A systematic literature review

“…In the case of formulated products, many of the methodologies consider an interdisciplinary approach, where aspects such as product properties, marketing, costs, management, and process design are combined or at least mentioned when presenting a design methodology 137,142,143,153 . Formulated products are frequently found in the consumer market, thus the inclusion of multiple variables and the application of interdisciplinary knowledge is necessary for their design 59,122,123 …”

“…The second most repeated combination is the one that includes the phases of needs analysis, alternatives proposition, and alternatives selection, with 24 publications (11%). These publications correspond to the methodologies addressing both problem definition and problem solving, where the customer needs become an important constraint for the design 59,122,123 . Product design methodologies that include the process design phase are not commonly found in the documents despite the importance of the topic, especially for formulated products 143 .…”

Value-informed pricing for virtual digital products: Evidence from Chinese MMORPG industry

“…For example, Dutta et al (2003) found that pricing capabilities can be a source of competitive advantage, and noted that firms must invest to develop and maintain the necessary pricing management skills and processes. Chan, Fung, and Ng (2018) summarized four pricing strategies, named as perceived value pricing (based on the value perceived by the customer), penetration pricing (set a lower price at product introduction), skimming pricing (set a higher price when a unique product is first to market), and promotional pricing (offer a lower price for a limited time), to set the price based on product quality and consumer awareness. Liozu (2017) agrees with the view that value-based pricing is a science requiring capabilities proposed by Hinterhuber and Liozu (2012), which relate to customer intimacy and what is critical in their daily operations, market segmentation, competitive analysis, and the ability to extract differentiation.…”

Product design: Nanoparticle‐Loaded polyvinyl butyral interlayer for solar control

“…1,2 In teaching, it is gradually becoming part of the mainstream of chemical engineering as signified by the publication of a number of monographs and textbooks. [3][4][5][6] In research, much has been accomplished in advancing different aspects of product design, which include microeconomics, 7,8 design strategy, 9 design models, 10 and simultaneous product and process design. [8][9][10][11] In addition, a framework that captures the hierarchical, multidisciplinary, and multiscale nature of product design activities has been formulated.…”

“…[3][4][5][6] In research, much has been accomplished in advancing different aspects of product design, which include microeconomics, 7,8 design strategy, 9 design models, 10 and simultaneous product and process design. [8][9][10][11] In addition, a framework that captures the hierarchical, multidisciplinary, and multiscale nature of product design activities has been formulated. 12 Elements of the framework that include model-based methods, rule-based methods, tools, databases, and experiments have been identified or developed to handle different design tasks.…”