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