quantilope's Ultimate Guide to Automated Pricing Research
Pricing research is any form of research that provides a brand with information telling them what consumers are willing and able to spend on their products and/or services.
Importance of Pricing Research Studies:
These studies are important to consider, because as societal norms and behaviors shift over time, so do price expectations based on new market conditions.
When you think of your favorite brands, it’s likely true that those brands have grown, changed, and adapted over the years to stay relevant with changing times and changing demands. Take for example your preferred toothpaste brand or favorite shampoo, and how their packaging has changed since you first bought it many years ago. You continue to buy that brand because you’ve come to know and trust it, but that doesn’t mean you won’t be swayed to try something new if you find a better offer in the market.
To maintain a loyal customer base, brands must keep up with the competition by growing, shifting, and adapting aspects of their products, and price changes are no exception. Especially now, with raw material costs on the rise and a shortage of labor and supplies, a strong pricing strategy needs to be a top priority for brands in their market research initiatives.
Through a research-backed understanding of consumers’ price perceptions, brands can safeguard their market share by optimizing their prices to keep consumers happy while maximizing their profits. Trends show that while consumer demand is on the rise, many consumers may still be recovering from job losses, income cuts, and a rise in debt since the onset of the pandemic. Brands that perform strategic pricing research will be able to stay closer to understanding consumers’ needs and expectations in this changed era.
Further, pricing research can be leveraged for launching/rebranding new or existing products. Accurately understanding how much a consumer is willing to pay for a new product is key to an innovation's success. The end result is a win-win: consumers feel their voices are heard and brands maintain (or grow) their profits amidst shrinking budgets to offset the rise in material costs.
With the importance of pricing research in mind, what exactly does this kind of research entail?
There are many types of market research pricing methodologies available to insights leaders. Some of the most common include: Gabor Granger, Brand Price Trade-off (BPTO), Conjoint Analysis (also known as Discrete Choice), and Price Sensitivity Meter/ Van Westendorp.
Using any of these above-mentioned methods allows a brand to explore its pricing strategy in a unique way. While all are different approaches, any form of pricing research provides a brand with insights into consumers’ pricing expectations, whether that be an acceptable overall price range, an optimal price point, competitor pricing comparisons, or the hierarchical importance of price among other product features (to name a few).
Say a brand is thinking about moving its revenue intake to a subscription-based model. What are consumers spending on similar subscription-based products/services? Do consumers prefer an annual subscription over a monthly subscription? What is the most a brand could charge without losing their customer base during this shift in their revenue stream? These are the types of questions a brand should be leveraging pricing research for before making impactful decisions that could make or break their business.
Amidst the plethora of pricing research options out there, quantilope has automated two of the most commonly leveraged: Choice-Based Conjoint Analysis and Price Sensitivity Meter/Van Westendorp.
Choice-Based Conjoint Analysis
Conjoint analysis is considered one of the more sophisticated pricing research methods available to insights leaders. This method captures consumer preferences (price included) by presenting respondents with a set of products with different individual attributes and asking them to select one product from that choice set. It can be used to gain a deeper understanding of consumers to allow you to create preference-based audience segments.
Unlike other quantitative pricing methods, a conjoint analysis takes into consideration multiple aspects of a product and places them in a competitive context (two reasons why this method is considered more sophisticated than other approaches). This creates a scenario that most closely simulates a real-life shopper experience by comparing different products when it comes to product attributes like packaging type, ingredients, and of course, price.
Price Sensitivity Meter/Van Westendorp
Price Sensitivity Meter/Van Westendorp is a pricing research method created by Dutch economist Peter Van Westendorp that is used to investigate varying price perceptions and price limits consumers have.
This particular pricing method asks respondents a series of four questions:
- At what price would you consider the product to be so expensive that you would not consider buying it?
- At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good?
- At what price would you consider the product starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it?
- At what price would you consider the product to be a bargain—a great buy for the money?
What does automated pricing research look like at quantilope?
quantilope’s approach to these two mentioned pricing methods allows brands to obtain pricing insights quicker than with other vendors, with more flexibility, and with the support of a team of certified research experts.
Choice-Based Conjoint at quantilope:
Choice-Based Conjoint studies include many different analytical outputs that can help drive pricing decisions. With quantilope’s end-to-end research platform and real-time market simulator, all these analytical charts are available in one spot, within moments of the first few completes trickling in, and with the ability to customize base groups, chart colors, and more.
Because this method is considered one of the more sophisticated ones in pricing research, quantilope users benefit from having constant access to our team of certified research consultants, also known as our ‘Success Lab’. This team of experts is available at any time to help craft the proper pricing questions and ensure the analysis is top-notch for your important stakeholder meetings.
Below are two examples of Choice-Based Conjoint outputs on quantilope’s platform, the first for incremental Attribute Importance and the second for Purchase Likelihood:
Price Sensitivity Meter/Van Westendorp at quantilope:
As mentioned, this method asks respondents a series of four specific pricing questions. From those four questions, charts are automatically generated to identify the following price points:
Optimal Price Point: The price at the intersection of ‘too cheap’ and ‘too expensive’ (shown below with a crown icon)
Indifference Price Point: The price at the intersection of ‘cheap’ and ‘expensive’ (shown below with an upward-facing arrow)
Price Range: The shaded green section below between the lower/upper price limits (shown with a downward-facing arrow and circle icon, respectively).
By leveraging quantilope’s platform for this pricing method, users generate an intricate output (like the one above) from just a simple drag + drop of the method into their survey from our pre-programmed method library.
Like all methods, quantilope’s Price Sensitivity Meter is also fully customizable, so users are able to adjust the specific price points within the analyze function and immediately see how those price fluctuations shift the brand’s overall share of preference.
Regardless of which automated pricing research method a quantilope user opts to leverage, the results are the same in one aspect: elevated insights into consumers’ pricing perceptions.
Are you ready to enhance your pricing strategy?
Brands who are proactive in their use of market research budget for pricing studies will be the brands that stay the most relevant and competitive as the cost of interim goods continues to rise. Pricing your end product too high will risk the loss of valued customers. Pricing an end product too low will lead to troubling margins and limited growth.
To keep the momentum going and to learn more about how you can leverage various pricing strategies for your brand, download The Ultimate Guide to Automated Pricing Research White Paper below which includes two short demo videos on each of quantilope’s automated pricing methods.
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