Pricing research

The Basics

There are, crudely, three alternative approaches to pricing research.  Each of these has many variations but the following should help you decide which route you need to pursue.

Option 1

If you are only looking at the price of your product and are not certain of what an acceptable price range might be then a price sensitivity approach (often known as Van Westerndorp) is appropriate. 

Here we ask four questions to identify prices that are considered too cheap, cheap, expensive and too expensive.  The resultant data allows us to identify the optimal price range for your product.  A further two questions can identify willingness to pay at the cheap and expensive prices.

Option 2

If you are only looking at the price of your product and you know the approximate price range you are looking at, then a “willingness to pay” approach (often known as “Gabor-Granger”) is appropriate.

Here we ask respondents how likely they would be to purchase a product at a range of potential prices.  The resultant data allows us to provide a price-demand curve for your product.

Option 3

If you wish to investigate price among other aspects of your product configuration, i.e. how would price perceptions react to a change in recipe or portion size, then some form of trade-off exercise is appropriate. 

Trade-off exercises come under many names; most of them including the word conjoint.  As the name suggests, this approach allows respondents to trade-off various potential product benefits, including different price levels, and allow you to see how people value different benefits. 

How these tests can be conducted

Often pricing research is undertaken as part of a larger survey; for example, as part of a concept or product test.  In such cases, it is probably the other elements of the research that would determine the survey method.

Essentially, there is nothing about the questions used that would prevent you conducting pricing research online.  Indeed online research is ideal since the order in which prices are shown can be strictly programmed into question scripts to iron out order effects...and, of course, conducting the research online makes it more affordable!