There is no suitable demand curve to plot pricing optimization from, a common strategy in commoditized products and services (Ketzenberg, Zuidwijk, 2009) so the BabyWatch must be value-based priced as a result (Abele, Elliott, O'Hara, Roegner, 2002). For parents who have an infant at home within the first six months schedules are completely redefined and sleep is at a premium. The value of a good nights' sleep and the ability to set predictable schedules for the care, feeding, changing, and attending to an infant is equivalent to the opportunity cost of lost sleep. Taking the salary of a professional who earns $60,000 a year for example a given week represents $1,153. The value of having a very productive start to their week is 20% of this or $230. For those professionals earning a higher salary the value of a productive start to their work week increases correspondingly. Assuming the target market is middle to upper income families the target price, from this value-based standpoint, could be $200 or more. Parents would be willing to have their sleep schedules predictable to make sure their work weeks were started productively...
The arguments of a recessionary economy forcing prices down (Caudillo-fuentes, Li, 2010) need to be taken into account. Yet sleep, time management, being alert in one's job, are all critically important duri9ng a recession to retain one's job. The price point of $200 would further show the quality of the device and its value as part of staying rested and alert for work.
References
John M. Abele, Brian R. Elliott, Ann A O'Hara, & Eric V Roegner. (2002). Fighting for your price. The McKinsey Quarterly,(4), 116-125.
Boyle, P., & Lathrop, E.. (2009). Are consumers' perceptions of price-quality relationships well calibrated? International Journal of Consumer Studies, 33(1), 58-63.
Caudillo-fuentes, L., & Li, Y.. (2010). Revenue management during times of recession. Journal of Revenue and Pricing Management: An Associated Publication of the INFORMS Revenue Management, 9(1-2), 185-188.
Ketzenberg, M., & Zuidwijk, R.. (2009). Optimal Pricing, Ordering, and Return Policies for Consumer Goods. Production and Operations…
