Deciding on a price for a product or service is one of the most important decisions for any organization.
Because companies need to cover their costs, it is vital that the price of an item is high enough to cover expenses, but not so high that customers won’t be willing to pay for the product. There are many market research techniques that are important to determine the best price point for any given product.
At Bontic Consulting Group we may consider to apply any of these 4 approaches.
- Conjoint Analysis
- Van Westendorp
- Additional tool
Conjoint analysis is one of the main research techniques for determining price. When conducting price analysis with this process, researchers determine what customers give up by paying a certain price for a product and compare that against the features the customer is gaining by purchasing the product.
Gabor-Granger is basically direct marketing. When using this method, customers are asked whether they would buy a product at a particular price. Then, the price is changed, and the customer is again asked if they would purchase the product. From these questions, an optimum price is determined. Then, demand can be determined once a price point is chosen.
The Van Westendorp strategy is also a direct pricing method. This strategy is the process of presenting respondents with different questions to determine whether a product is either too cheap, cheap, expensive, too expensive, or a bargain. Then, these prices are plotted, and the area between is used to determine the range of acceptable prices.
Any of these three methods can provide a solid foundation to determine what the best pricing strategy is for a project. In addition to these strategies, organizations can use competitive intelligence from syndicated market research reports to determine competitors’ successes and failures to help determine what pricing strategies attract, or deter, customers as a compliment to their own research.