In Vivo BVA tries to avoid the major drawbacks of traditional methods to determine the most appropriate pricing strategies.
Testing in actual retail situations
In theory, test markets are ideal, since they put shoppers in their natural setting.
But this approach has two drawbacks:
Testing conditions cannot be perfectly controlled: to guarantee that only the Price variable is being measured, all the results must be comparable according to the tested price levels. However, during testing in actual stores, some conditions (department heads, competitors' promotions, price changes, tracts, etc.) may make it difficult to make comparisons and make sense of the results.
Researchers cannot test multiple Price scenarios: actual store testing makes it difficult to test more than just a few prices for a single brand while broadening the possible range to include competitors' reactions, due to cost, time and feasibility concerns.
Price Trade-Offs
Once again in theory, this solution is good for multiple price scenarios and identifying optimum Price strategies. Simulations can be done to assess how different scenarios impact all market players' decisions.
However, price trade-offs are based on a theoretical approach that has been disputed by a highly rational researcher (see work on limited rationality by Herbert Simon, Reinhert and Daniel Kahneman, winners of the Nobel Prize in Economics)
Trade-off theory assumes rational decision-making that is quite far from the reality of human behavior and is based on the principle of "pure and perfect competition," where each decision maker is aware of everything about all the products available after having analyzed each one. The decision maker determines the objective that maximizes utility and makes a final rational choice. The most recent work in cognitive science has demonstrated the fundamental error of this theory, which results in very rational decisions that are far from actual human behavior
In trade-off theory, by gathering information, people get exact knowledge of prices, which exaggerates the role price plays in the consumer goods decision-making process. By focusing on price when collecting information, the procedure encourages consumers to overestimate the role price plays compared with the impact of other variables on the actual decisions made in stores. This has a very strong impact on small price changes and does not reflect reality as observed on the market.