An Estimation Method of the Demand Function of New Product Based on Customers’ Evaluations

Abstract

This paper proposes an estimation method of the demand function (the relation between price and demand) for a new product by customers’ evaluations to obtain the basic information with regard to the customer- oriented pricing for the product. There have been many studies for the estimation of the demand function. However, in the studies so far, the demand functions have derived from the curve fitting method to the actual results. It is impossible to estimate the demand function of the new product based on such a method. By the way, there exist features that the monetary values by customers’ evaluations are full of inconsistent uncertainties with large variances among the evaluators. First, in this study, the evaluated monetary values with these features will be adjusted based on the correlations between the performance levels of product functions, then the relationship between price and purchasing desire (purchasing probability) will be drawn out of each customer. Second, the relationship between the price and the distribution of the purchasing rate is derived from the above mentioned relationships for the individual customers, then the demand function of the new product will be estimated based on the proposed result. Furthermore, the representative value as an index of the customer- oriented pricing will be calculated from the estimated demand function. Finally, the proposed method in this study is applied to new types of kitchen furniture to examine the validity of the method.