Alcon Laboratories has just completed a series of product tests for a new over-the-counter eyedrop product. This product proved very effective in clearing up bloodshot eyes in clinical trials and has been perceived to be effective by consumers in market tests.

At this point, the effectiveness of the product, both clinically and in terms of consumer perceptions, has been demonstrated. There is now a debate between two different factions on the product and marketing teams regarding pricing. One group feels strongly that the product should be priced only slightly, in the range of 5 percent, higher than the competition. Members of this group are of the opinion that demand for these types of nonprescription eye drop products is relatively elastic. Further, they think that their proven clinical and perceptual advantages are not enough to overcome a price differential of 10 percent, and possibly not enough to overcome a differential of even 5 percent. They think that higher differentials will lead consumers to choose a competitive product.

The other group believes that the advantages of the new product and the associated claims that they can make based on the clinical trials will justify a price differential of 20 to 25 percent. Their thinking in this matter is partially supported by focus group results and some similar experiences with related products. These differences have been the subject of several meetings, some of them quite heated, with neither group willing to change its position. The issue has become highly dysfunctional and is starting to hurt the company in terms of delays in the introduction of what many see as an innovative new product. Senior managers who have to approve the launch and the pricing see some logic in the arguments advanced by each side and do not think that they have the information necessary to make an informed decision. They do not want to make the decision on an arbitrary basis or to be seen as favoring one group over the other for no apparent reason. They have decided that the best course is to conduct a market test and to make the final decision based on the results of that test.

Questions 

1. The company used an interrupted time series design for a similar problem involving a particular product feature. Describe a test that would utilize an interrupted time series design to address the pricing question. Would this type of test provide a definitive answer to their question? Why or why not?

2. What other type of experimental design might the company utilize to answer the question it is trying to deal with? Describe how that design would work in this case. Would that approach be superior to the interrupted time series design? Why or why not?

3. Regardless of the approach used, when comparing the effectiveness of the two prices, would you be more interested in total unit sales or total revenue when comparing results? Justify your response.