Price Research

Price Research

You may know by now that people don’t always make rational decisions when buying products and services. Although in principle, we all want to pay as little as possible for things, there are lower and upper price thresholds upon which we believe or question the value of a product. Buyers are always making tradeoffs between price, quality, and other perceived benefits. Price is never considered in isolation, even by the most price-sensitive buyers.

Pricing is the element of the marketing mix with the most impact on revenues and the most difficult to research. The goal of price research is to help companies choose a pricing strategy that better suits their revenue goals and market conditions.

Why You Should Do It

Without price research, companies risk pricing products based on assumptions that don’t reflect how buyers make purchase decisions. A product concept test without price information may indicate the product idea can be successful. However, once the price information is added, the potential buyers may change their minds about it.

Price research can help your company make better decisions about price changes (increases or decreases) and find optimal price ranges for current and new products by considering pricing impact on cost, and your product’s position against competitors.

Price research can be part of product concept testing or product portfolio optimization research.

The Approach

Price research is often based on quantitative research, using survey methodology. Given the complexity of price research, we always try to mimic realistic scenarios in which buyers are confronted with price information in the context of a purchase decision.

The most common approach used for this type of research comes from the tradeoff techniques in the conjoint analysis family. However, sometimes variations of product concept testing can be used depending on the study objectives and product information available. We use different research designs depending on the product complexity and research objectives. See Analytical Plan below.

Target Audience Recruitment

Relevant Insights can recruit qualified B2C and B2B participants through our sample provider partners for qualitative and quantitative research. We determine the sample parameters from discussions with your team and assist with developing screeners. We also manage participant incentives.

Implementation

In direct collaboration with your team, Relevant Insights will:

1. Recommend the data collection mode based on sample parameters and the industry in which your organization operates. Surveys can be conducted online or with a hybrid approach (online, phone, in-person).
2. Develop questions and metrics to support an analytical plan that meets the project’s business and research objectives.
3. Discuss recommendations for sample size and sample sources. Sample size requirements will depend on the product category, target audience, and incidence rates, among other factors.
4. Program, test, and host the survey. In addition to testing the programmed survey for errors before its launch, the survey will be deployed to a small sample to detect any potential issues with actual participants before its distribution to a large sample.
5. Monitor the field and provide daily reports on its progress and any issues that may arise.

Analytical Plan

Price research can be designed in different ways:

• Monadic Concept Testing – Only one product with price information is presented.
• Sequential Concept Testing – Several products with price information are presented sequentially in random order or in a pre-determined order.
• Pairwise Comparisons – Two products with price information are presented simultaneously.
• MaxDiff Analysis – Multiple products with price information are presented simultaneously.
• Choice-Based Conjoint Analysis – Multiple products with price information are presented simultaneously.
• Adaptive Conjoint Analysis – Multiple products with price information are presented based on rules used by participants to choose products.
• Menu-Based Conjoint Analysis – Products with price information are presented through build-your-own product exercises.

The study design selection will depend on study objectives, creative materials available for testing, time, and budget constraints. We recommend designing price studies where competition is taken into account, which is only possible with certain research designs.

The metrics obtained will depend on the selected study design and may include measurements of:

• Product appeal and relevance in the context of pricing.
• Optimal price ranges and price points.
• Impact on cannibalization.
• Likelihood to purchase.

Reporting

Relevant Insights can provide different levels of reporting based on budget and time constraints including:

• Raw data only.
• Price simulators (for Conjoint Analysis studies).
• Cross-tabulated tables by key variables.
• A short summary report with key findings.
• A full, detailed report with analysis, charts, tables, quotes, and graphics in an appealing format.

Typical Project Duration

Four to eight weeks.

Factors that affect project duration include:

• The incidence rate of the target sample: The lower the incidence rate, the longer we need to stay in the field to gather the required data.
• Client team responsiveness: A delayed response to requests for feedback at different steps of the project will stall it and affect the delivery date.

Investment

The cost will vary depending on:

• Data collection method (online or hybrid).
• The analytical plan selected.
• Sample size, specification, and sources (outside customer database).
• Reporting requirements.