Value Versus Price Segmentation of Family Automobiles

The questions of how to price a product-line across segments and to price an element of the line within a segment is explored here using the market for family automobiles as a test case. Monroe's (1990) psychometric model is considered for pricing between segments and the demand model of Cook and Kolli (1994) and Donndelinger and Cook (1995) is used to study pricing within segments. The segmentation of the market for family automobiles is rationalized by sorting vehicles into groups having similar prices and overall values. A rule of thumb is introduced for pricing in a dynamic market in which the values, costs, and prices of the competing products are volatile as a result of intense competition generating product improvements on a continuing basis.