Applying Conjoint Analysis to Product Assortment and Pricing in Retailing Research

In a recent review of developments in retailing research, Mercer (1993) listed product assortment and pricing as two of the most important areas for the application of research methods. General merchandise retailers typically offer a variety of competing brands in a specific product class, at different prices. The problem of which brands to offer, and at what price, is of central importance. Too narrow a brand assortment runs the risk of some buyers shopping elsewhere for their selection. Too wide an assortment can entail additional handling, inventory, and paperwork costs and still runs the risk of stockouts for the more popular brands. The proposed model has been designed to help the retailer examine the joint effects of product availability and pricing on potential buyers' selections among alternative brands in a specific product class. The product class is electric mixers. We first briefly review previous research on price-demand modeling. We nest describe the particular version of conjoint analysis that is incorporated in the model proposed here. The application is then described, followed by a discussion of the study results and their implications for management.