How to Figure Out Demand Consumer Choice Theory - Management Assignment Help

Assignment Task:

Task:

How to figure out DEMAND?

Recall ~ Consumer choice theory ~

Traditional theory of choice ~ demand curve

Business interpretation for demand curve is

To understanding your customer better ~

Value generated for the customer

Main concept ~ Willingness to Pay (WTP)

Defined as ~

Is the maximum amount of money a customer is willing to pay for a product or service.

WTP ~

WTP ~
Applicability

WTP ~ is applicable to ~

Tangible products ~ how much would you pay for a bottle of soda on a hot day? ~ POLL#2

Services like Music ~ Sportify

There were 286 million monthly active users of Spotify according to the company’s Q1 2020 report. Of these, 130 million were Spotify Premium subscribers.

Charitable causes ~ benefits are for someone else

How much would you pay for eradication of Malaria from Africa?

Businesses attract consumers by statement ~ 10% of the proceeds will go towards educating girls in a specific country.

WTP ~ not directed to self-interest or for self-consumption

It is a concept applicable to many situations. An individual will not pay a Price above his WTP.

Question ~ why people buy more G&S during sale period?

More customer’s WTP > Price during sale

Problem WTP ~

Measurement: It is hard to measure WTP of a consumer

As the more you know about the WTP ~ the better would be the pricing strategy of a business

There are certain factors that impact consumer’s WTP

Extrinsic factors (observable)

Income, gender, education, the product is in fashion, economic environment (recession/boom)

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