The price-demand curve graphically presents the price elasticity of the product or service, while an accompanying table presents the demand at any price along the continuum. Using this information, financial analyses can be performed to determine the best price to maximize financial objectives. The approach works well in new product categories where there might not be direct competitors and it is easily administered. The indirect questioning sequence is used to predict the optimal price and range where most purchases will occur. Once interviewing has been completed, the data is cleaned for logical accuracy and then the cumulative percentage of consumers who gave a particular price for each of the four questions is plotted.
Additional points are also determined, based on the intersection of other cumulative plots.
Following the PSM questioning sequence, the respondent is taken through the Direct Purchase Intent questions and the results are run through a Regression Analysis that produces the curvilinear line and an accompanying detailed table. Then, the Optimal Price Point from the PSM analysis is plotted on the price-demand curve. There are several trade-off techniques that can be used in pricing research. As a group, these techniques tend to be the most sophisticated and powerful types of analyses, but are more difficult and costly to conduct than the previously discussed methods. The three main techniques of interest are Conjoint Analysis, Discrete Choice Modeling and Choice-Based Conjoint Analysis.