(309b) Skin Lotion Design, Consumer Preferences and Price Competition

In the 2006 AIChe Meeting we illustrated our methodology for product design using connections between product properties to consumer preferences using the case of skin lotions. The method relies on building a consumer satisfaction model, which aside from effectiveness in skin moisturizing, incorporates other properties such as smoothness, thickness, spreadbility, etc. This model can in turn be used to engineer the lotion that maximizes consumer satisfaction. Subsequently, a pricing model is used to find a formulation that maximizes profit, which is not necessarily the one that maximizes consumer satisfaction. In this paper, we revise the consumer preference model and we extend the pricing model to determine what market equilibrium will be achieved, price wise under the assumption that competitors seek to maximize short term profit. We do this under different models with perfect and imperfect information. The exercise would not be a product engineering one, just an economics one, if it wasn't for the fact that the lotion formulation is allowed to change to obtain its optimal concentration together with the optimal marketing entering price. The illustration is based on a lotion to treat a common dry skin incurable disease.