Consumer Clinics

Another approach to demand estimation is consumer clinics. These are laboratory experiments in which the participants are given a sum of money and asked to spend it in a simulated store to see how they react to changes in the commodity price, product packaging, displays, price of competing products, and other factors affecting demand. Participants in the experiment can be selected so as to closely represent the socioeconomic characteristics of the market of interest. Participants have an incentive to purchase the commodities they want the most because they are usually allowed to keep the goods purchased. Thus, consumer clinics are more realistic that consumer surveys. By being able to control the environment, consumer clinics also avoid the pitfall of actual market experiments (read the post here), which can be ruined by ruined by extraneous events.

Consumer clinics also have serious shortcomings, however. First, the results are questionable because participants know that they are in an artificial situation and that they are being observed. Therefore, they are not very likely to act normally, as they would in a real market situation. For example, suspecting that the researches might be interested in their reaction to price changes, participant are likely to show more sensitivity to price changes than in their everyday shopping. Second, the sample of participants must necessarily be small because of the high cost of running the experiment. Inferring, however, a market behavior from the results of an experiment based on a very small sample can be dangerous. Despite these disadvantages, consumer clinics can provide useful information about the demand for the firm’s product, particularly if consumer clinics are supplemented with consumer surveys.