The optimal price

 

Whether a product or service is new or already established in the market, it counts to set prices and pricing strategies that are both marketable and profitable.

Depending on the offer and the purchase situation consumers form their price acceptance with varying degrees of awareness of expected and real product performance. In some situations the decision is heavily based on rational thought, in others, the purchase decision can be guided mostly by emotion – you buy something because you “have deserved it”.

Price research can measure decision processes from the rational and well thought out to the spontaneous and emotional purchase decision. We are happy to advise you on choosing the right tool!

ESTABLISHED PRICE TEST METHODS

Established price tests are based on the assumption of a mostly rational consumer decision:

  • Scaled purchase intention with and without preset price
  • Scaled price acceptance
  • Testing of accepted highest and lowest price points
  • Measurement of price elasticity according to Gabor-Granger
  • Price Sensitivity Measurement (PSM) according to van Westendorp

All the above methods are relatively simple and are frequently integrated into concept and product tests. They offer – regularly in the context of existing benchmarks – valuable insights about price thresholds and acceptance of different product variants. However, one should bear in mind that these results are based on purely rational judgments in the test situation, usually without taking into account the competition and the situation at the point of sale. They assume 100% price awareness and price-performance awareness. Therefore, although the results provide a good orientation, they still need to be compared with the market reality.

CONJOINT-BASED METHODS

Therefore, in addition to the common methods, there are other tools of price research that consider prices more indirectly or in the context of brand, competition and other marketing mix elements. These implicit, conjoint-based methods are essentially:

 

BPTO, Brand-Price-Trade-Off:

The respondent makes a “purchase decision” based on several brands / products that are shown together with prices. Immediately after each decision the price is changed and the respondent is asked to choose once more. This process is repeated several times. Naturally, the BPTO method focuses strongly on the price but gives also information on price elasticity and the constellation of user shares in different pricing scenarios. With sufficient sample size a segmentation is possible as well. However, the BPTO only regards the price in combination with brand / product and does not measure the influence of varying product features or package designs on the price.

 

CBC, Choice-Based-Conjoint and other Conjoint Methods:

 

Conjoint-based methods take into consideration the influence on price of different product variants, packaging designs and other marketing mix elements in order to maximize marketability and profit. This analysis can include different market scenarios as well.

When using a conjoint approach it is essential to take into account “customer psychology”, i.e. to pay attention to the fact that consumer segments have different perception of price and purchase behavior. These differences need to be considered when setting market entry prices or when changing prices of established products.

PRICE TEST BY CONSUMER SEGMENTS

In order to take “buyer psychology” into account even more thoroughly in the analysis, i.e. to measure prices, price perception and price behavior for different consumer segments, MWResearch has developed a validated set of questions that identifies the different “price types” for the respective market category and takes them into account in the analysis. In principle, this segmentation is applicable to all studies and methods in which price is to be tested.

However, this segmentation is an indispensable “plus” for all studies that focus on pricing, i.e. PSM and Conjoint.

Conclusion

With our price research, we analyze how the prices of your products are perceived by your customers and what effects planned adjustments can have on turnover and sales figures. Optimize your pricing strategy!