Purpose and background:
One of the foremost tough selections to form once launching a replacement product is deciding a worth.
You don’t wish to depart cash on the table by undercharging, however you furthermore may don’t wish adversely impact demand by overcharging.
Finding the balance between too low and too high will be tough, and doing the survey research for these decisions can be even harder.
That is why a comprehensive valuation strategy is therefore necessary.
Scope and responsibilities:
Pricing is one in every of the additional technical areas of market research.
The aim isn’t to search out what customers like, but what they are willing to pay and so what the optimum price point is to maximise profit or revenue
or market share. Setting an appropriate price is not only limited to yielding profit, but is also used to defend an existing market from new entrants, to increase market share within a market or to enter a new market. Pricing research offers the following key benefits:
- Understand the market’s willingness to purchase
- Capture the highest return on our product investment
- Preserve the value of your brand
Price sensitivity will primarily be outlined as being the extent to that demand changes once the price of a product or service changes.
The price sensitivity of a product varies with the amount of importance customers place on price relative to alternative buying criteria.
Procedure and methodologies:
A)Financial insights and budgeting– Along with consumer feedback, it is important to take into account previous financial insights of the competitor companies as well as our own company
B) Common Pricing Methodologies: While there are several approaches to valuation strategy, three different methodologies generally emerge:
Van Westendorp Price Sensitivity Meter:
Developed by economist Peter Van Westendorp, the price sensitivity meter is a type of direct pricing research that constructs a range of acceptable prices for a given product. By asking the following four questions, Van Westendorp’s Price Sensitivity Meter creates a range of acceptable prices for a given product:
At what value would you start to assume the merchandise is just too costly to consider?
At what value would you start to assume the merchandise is therefore cheap that you simply would question the standard and not contemplate it?
At what value would you start to assume the merchandise is obtaining pricey, but you still might consider it?
At what value would you’re thinking that the merchandise could be a cut price – a good purchase for the money?
Gabor-Granger Technique:
The Gabor-Granger technique could be a style of direct valuation that asks respondents if they might purchase a product or service at a particular value.
Researchers then change the price and ask respondents again if they would purchase the product or service
Conjoint Analysis:
Conjoint analysis is often considered the most reliable way to determine pricing. Through discrete-choice modeling, a specific type of conjoint analysis, researchers can determine the influence that both price and product features have on customers’ willingness to pay.
Discrete choice modeling gives respondents a choice of two to five product configurations and then asks them to choose one of the configurations to help researchers determine packaging and pricing models. Ideally, a respondent’s choice reflects the value or utility he/she assigns to each attribute.
Each option is best applied specific situations and each comes with certain trade-offs.
