Pricing of a cosmetic product from the consumer feeling perspective

Abstract

In recent decades, numerous studies have been conducted on pricing from the perspective of economics, marketing, operational research, decision making, and consumer behavior. The key rationales behind these studies are to optimize pricing and to maximize profits. However, investigative work into pricing a product from the consumer’s feeling perspective is rare. Hence, this thesis involves the investigation of the relationship between the consumer’s feelings and pricing. To investigate the relationship of the consumer’s feelings to pricing, a retail product of a particular retail segment/industry has to be identified that can illustrate the effect of the consumer’s feelings in relation to pricing. The product and its involvement in the consumer market have to be generally accepted, descriptive and expressive in term of feelings and representable in the industry/market segment. Most importantly, the pricing framework developed can be applied to a wider range of products, or even extended to an industry segment. The cosmetics industry is a lucrative, innovative, and fast-paced industry. It is also a key market segment in the retail industry. Hand cream products, which are a part of the cosmetics industry, fit the requirements of the study. They are widely accepted by the consumer market. The products can be easily described and expressed by a number of common psychological feelings. Among the five physical senses—sight, hearing, taste, smell, and touch—touch can be the more expressive and descriptive. The study can be extended to include the skin care segment of the cosmetics industry, rather than a single cosmetic product—hand cream. The aim of this thesis is to apply in an innovative manner the technologies and scientific methods by which a hand cream product is priced from the perspective of the consumer’s feelings. Structured personal interviews with experts in the field and two questionnaire surveys are carried out to study the importance of feelings with respect to hand cream. The two techniques in the Kansei Engineering are deployed to quantify the consumer’s feelings and analyze the consumer’s feelings, namely the semantic differential (SD) method and principal components analysis (PCA). The hierarchical regression model and contingent valuation method (CVM) are deployed to project the price of the hand cream based on the perspective of the consumer’s feelings and to estimate the consumer’s willingness to pay for the hand cream. The findings of this study reveal that the groups of feelings from the principal components analysis (PCA), the product groupings, and the social demographics are key factors in the pricing of hand cream from the perspective of the consumer’s feelings. In addition, the hierarchical model shows how these factors both individually and aggregately affect the pricing from the perspective of the consumer’s feelings. The key factors are then presented in a regression formula which prices the hand cream from the customer’s feeling perspective. After inserting the survey data into the regression model, 78.26% and 82.61% of the predictive pricing fell within a deviation of 25% and 35%, respectively. The results are in line with the high explanatory power of the regression model. With the support of the reliable results, a guidelinnes of the pricing process is developed to outline the stages as well as the possible consierations for each stage. The study concludes that the social demographics of the two surveys are in common, although the purposes of the two surveys are different. Again, the pricing mechanism can never be simple. The factor of product grouping significantly enhances the pricing model.