Project

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Developing tools for designing and pricing services

English title Developing tools for designing and pricing services
Applicant Moresino Francesco
Number 165882
Funding scheme Project funding (Div. I-III)
Research institution Haute école de gestion de Genève Filière Information et documentation
Institution of higher education University of Applied Sciences and Arts Western Switzerland - HES-SO
Main discipline Science of management
Start/End 01.09.2016 - 28.02.2018
Approved amount 154'836.00
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All Disciplines (2)

Discipline
Science of management
Mathematics

Keywords (5)

D-optimal experimantal design; conjoint analysis; share of choice model; pricing services; designing services

Lay Summary (French)

Lead
Tarifier correctement un service n’est pas chose aisée. Idéalement la tarification doit prendre en compte les aspects de production, la perception des clients ainsi que la concurrence (tripode de Lovelock). Malheureusement, lorsque les attributs saillants sont trop nombreux, il est très difficile d’évaluer la perception des clients.
Lay summary

Contenu et objectifs du travail de recherche

Dans ce projet, nous proposons de développer une nouvelle méthode permettant de designer et de tarifier un service, et ce, même si les attributs saillants sont nombreux. En remplaçant les fonctions d’utilité par une fonction de demande consolidée, nous pourrons fractionner l’étude de marché en une multitude de sous-études plus faciles à gérer. La construction ainsi que la consolidation des  sous-études seront réalisées en utilisant le concept de D-optimalité.

Contexte scientifique et social du projet de recherche

Jusqu’à récemment seules les méthodes de «yield management» permettaient  de tarifier un service en tenant compte du tripode de Lovelock. Malheureusement, ces méthodes ne sont utilisables que pour des secteurs économiques ayant atteint un degré de maturité suffisant car elles présupposent  que le service est un produit homogène. Récemment des chercheurs ont proposé une nouvelle méthode permettant de tarifier mais aussi de designer un service hétérogène tout en respectant le principe du tripode de Lovelock. Ce projet permettra d’améliorer cette nouvelle méthode. En outre, nous développerons un logiciel facilement utilisable par les professionnels de la branche. Ce logiciel sera offert à la communauté en libre accès et permettra de faire le lien entre la recherche académique et l’industrie.

Direct link to Lay Summary Last update: 26.04.2016

Responsible applicant and co-applicants

Employees

Name Institute

Collaboration

Group / person Country
Types of collaboration
HES-SO Valais Switzerland (Europe)
- in-depth/constructive exchanges on approaches, methods or results
- Industry/business/other use-inspired collaboration

Use-inspired outputs

Software

Name Year
PrefShare 2018


Abstract

The knowledge and service economy produces intangible goods. Unfortunately, unlike physical goods, the pricing of intangible goods is not obvious and presents a real challenge. While there are a plethora of approaches for physical goods, little work has been devoted to intangible goods. Ideally, the pricing of services should be based on the three following components: the cost structure, the competition and the perceived value by the users. This is the famous tripod proposed by Lovelock. Only few time ago, only one method respected these requirements. This method, called yield management comes from the theories developed in the field of production management. This method models the production of the service as well as the customer perception. It is used very effectively in hotels or in the aviation sector. Unfortunately, it is only applicable to economic sectors that have reached a certain degree of standardization. Indeed, for economic sectors that have not reached a certain maturity, the heterogeneous nature of the good prohibits the use of this method. Recently, Fragnière and myself proposed a new method combining techniques from operations research with techniques from marketing science that allows to price intangible goods even when it has a strong heterogeneity level. Schematically, this method couples a share of choice model with a production management model. The meta-model so obtained is a mixed integer program and can be solved with standard techniques. The utility functions of the share of choice are estimated thanks to a survey, applying standards techniques of conjoint analysis. It is important to note that this method, unlike the majority of other pricing methods, provide us also with the best service design. Unfortunately, like other methods, this new method can be hard to implement when the service's salient attributes are too numerous. In such case, during the survey, the respondents can be over own by information and their answer could be not accurate. Another weakness of this new method come from the fact that the number of binary variables in the meta-model is proportional to the number of respondents. Indeed, the number of binary variable increases drastically the computational complexity. Therefore this method can be computationally not tractable for huge sample sizes.In this project we propose to improve this new method in order to be able to handle bigger sample sizes and services with a large number of salient attributes. The improvement rely on the fact that in the share of choice model only the market share is important. The utility function of each respondents can be replaced with a consolidated demand function. Doing so, many binary variables can be removed from the meta-model and its computational complexity will not depend on the sample size. Another benefit from this consolidation comes from the fact that we can elaborate new methods for the experimental design.To sum up this project proposes to develop a method for designing and pricing services that is also operational when the service is not homogeneous, when the sample size is big and when the service salient attributes are numerous. Another important contribution will be the creation of software tools that will be easily used by practitioners and offered to the community in open access.
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