Pricing study

A pricing study identifies the best pricing for the product or service.

It is typically conducted during the product development phase but can also be relevant when an already existing product or service needs adjustments to meet market needs.

The purpose is to identify the best price range for one or more products or services based on consumer preferences. Through balancing the product or service price against consumer expectations, a pricing study will provide the foundation for maximizing profits for a new or adjusted product or service.

Key insights from a pricing study

  • Optimal pricing level
  • Consumer pricing preferences
  • Product or service value for money indicators
  • Price elasticity measures.

With a pricing study, you will not only gain insights on the optimal price for your product, but also get an overview of the price elasticity.

We apply recognized methods to analyze pricing preference data, such as the Gabor–Granger method and Van Westendorp's Price Sensitivity Meter. Which methodology to use depends on the market situation; pricing studies can be both a part of the product innovation or for testing price levels and price elasticity amidst sudden change in market conditions, competition or as part of a product relaunch. If you are in doubt how to design your pricing study, we can guide you based on your individual research objectives.

Price elasticity with Gabor-Granger

The Gabor-Granger method is typically used to identify price elasticity. The research uncovers three questions:

  • Can the price of a product be increased without affecting sales (demand)
  • At what price point does the demand start to decline drastically
  • What is the price that results in the largest expected revenue.

Uncovering price elasticity can be done in an isolated study or in connection with a price sensitivity study (cf. below), other pricing study approaches (e.g. a MaxDiff or conjoint analysis), or as part of a concept test.

Price Sensitivity with Van Westendorp

The Van Westendorp's Price Sensitivity Meter is a classic way for consumer brands to uncover the optimal price point for their product. The study consist of four standardized questions:

  • At what price would you consider the product to be so expensive that you would not consider buying it? (Too expensive)
  • At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good? (Too cheap)
  • 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? (Expensive/High Side)
  • At what price would you consider the product to be a bargain—a great buy for the money? (Cheap/Good Value).

The reporting identifies three values:

  • The point of marginal cheapness (PMC)
  • The optimal price point (OPP)
  • The point of marginal expensiveness (PME).

The Van Westendorp Price Sensitivity Meter

Uncovering price sensitivity can be a part of a market profiling study and/or be combined with a Newton/Miller/Smith demand estimation including two more questions:

  • At the <expensive price> how likely are you to purchase the product in the next six months? Scale 1 (unlikely) to 5 (very likely).
  • At the <cheap price> how likely are you to purchase the product in the next six months? Scale 1 (unlikely) to 5 (very likely).

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