Your Guide to Pricing Research

Savannah TrotterMay 6 2021
Image of a sample price research study featuring ice cream flavors and toppings, alongside a graphical output of pricing research data.

Finding the perfect pricing for your product is no easy feat. 

While price can majorly influence consumers' buying habits, it's an equally important factor for businesses. Finding the optimal price point can allow you to attract buyers, maximize profits or grow market share.

But choosing a pricing strategy isn't quite that simple. 

If you choose a price point that is too low, consumers might well assume your product is low quality. But on the other hand, if the price is too high you'll likely turn them off altogether.  

After investing months (or even years) in product development, honing in on the perfect pricing strategy is crucial for success. Research from Harvard Business School has shown even a 1% improvement in your pricing can generate up to an 11% increase in your profits. And what is the best way to improve your pricing? Pricing research. 

Pricing research allows you to discover what consumers are willing to pay for your product or service. Depending on the type of pricing research, you can better understand the value consumers place on both your product and its features. 

With the data collected, you can then determine the optimal pricing that boosts sales, increases market share, and piques consumer interest. 

Pricing Research Methods 

The research methodology you choose is dependent on your research goals, the maturity of the product, and other data points. Below are a few techniques to consider: 

Conjoint Analysis

We would recommend using Conjoint Analysis if you are interested in learning not only about price, but also the optimal combination of product attributes to pair with it. It can help you optimize your product and your pricing. 

Conjoint analysis helps to identify the rules consumers explicitly (and implicitly) use to make their purchasing decisions. The premise of this technique is fairly simple. Consumers conduct mental trade-offs between pricing and other factors like quality, functionality, style, etc. 

For this type of research, you expose consumers to multiple product components shown in various combinations, each with different pricing. Once the data is collected, the subsequent analysis will show you what features consumers value the most and the price(s) they are willing to pay for them. 

For example, say you have new ice cream flavor ideas. You may want to test:

 

Price: Size: Flavor:
$10 Small Milk Chocolate
$15 Medium  Pistachio
$20 Large Dark Chocolate 

 

Once you’ve identified your features and pricing, all that is left is to use the SightX Conjoint functionality. Simply insert your combinations and the platform will generate a balanced experiment. 

The analysis will leave you with a clear understanding of your optimal pricing and the value consumers place on each of your product features. 

If you’re interested in learning more see our full blog on conjoint analysis.

Price Rating with Concept Testing

This study will provide you with insights into the overall favorability and sensitivity to various pricing brackets. 

Concept testing is the process of evaluating a product feature to better understand the way it will be received by consumers in the market. Concept tests allow you to expose consumers to your offering and then directly ask for their feedback on its appeal, their purchase intent, and the amount they would be willing to pay for it. 

This test is quite straightforward. It works by simply sharing information about your product, usually via a combination of text and images, and then asking consumers about their degree of price sensitivity through a series of multiple-choice questions. 

For example, let’s say you have four price points you would like to explore: $30, $35, $40, and $45. You would ask questions like: “How likely are you to purchase [X Product] for $30?” Then: “How likely are you to purchase [X Product] for $35?” 

This would continue until you’d asked about all of your price points. We often recommend randomizing the order to ensure unbiased market research.

See our full blog on concept testing to learn more. 

Gabor-Granger Direct Pricing Technique

Gabor-Granger is similar to the test above and is best if you already have a defined price range and are looking to pinpoint the optimal price. 

Like the price rating method above, Gabor-Granger asks respondents if they would purchase your product at a specific price. The question is then asked again, with a new price. Often, this research is done with multiple price points, asking respondents: “Would you buy [X product] for $30”. 

The following questions change according to the respondents' answers; if they will purchase at $30, the next question will present them with a higher price. The goal of this research is to find the maximum price consumers are willing to pay. The data will then show you the optimal price for your product in the market. 

Numeric Price Entry

We would recommend numeric price entry if you're just exploring the pricing perceptions of your target audience. 

This method of pricing research consists of simply asking respondents: “how much would you be willing to pay for [X product]”. The aggregate responses provide insights into the average price consumers are willing to pay. 

Van Westendorp's Price Sensitivity Meter

This method of research is best if you are looking for a simple and quick study that will give you a lower threshold, upper threshold, and optimal price point.

It does this by asking respondents only four questions: 

  • At what price would you begin to consider the product so inexpensive that you would question the quality and not purchase it? 
  • At what point would you think the product to be a bargain? 
  • At what price would you say this product is starting to become expensive- to the point that you’d have to give some thought to buying it? 
  • At what price point would you consider the product to be so expensive that you wouldn’t consider buying it? 

 

Ultimately, the pricing research method you choose will depend upon your unique goals and current stage of product development. Whether your brand is looking to increase revenue, attract buyers, or grow market share, pricing research can help you succeed. 

Request a demo and started on your own pricing research with SightX today!

 

Savannah Trotter

Savannah Trotter

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It should come as no surprise that consumer behavior has evolved quite a bit in recent years, but that evolution was fast-tracked in 2020. From where they shop to how they want to connect with their favorite brands- consumers demand engagement on their terms.

Effective engagement can mean speed and efficiency, but more often than not, it also demands creativity.

For insights teams, in particular, this can be a challenge. However, a modern, effective, and creative way to get impactful feedback from consumers is through a heatmap experiment.

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Historically, heatmaps have been a popular visualization tool with data-driven researchers across industries. Given current consumer trends, it shouldn’t come as a surprise that heatmaps have been gaining popularity in recent years amongst leading researchers. While they remain a key tool in user interface and experience research, their usage in concept and product testing research continues to gain popularity.

To help spark some creativity and curiosity, we’ve put together a list of simple ways you can incorporate heatmap techniques in your own research:

Whitespace & Prototype Testing
Exploring white space and researching prototypes are important initial steps in the product innovation process. If you have some initial ideas or mock-ups for a product, heatmaps can be an important early indicator about which attributes your potential customers would be compelled by, or (just as importantly) be repelled by.

Efficient and effective prototype feedback allows you to refine your products earlier in the development process- before you even begin building your minimum viable product (MVP).

Design Testing
Getting feedback on visual design elements like fonts, colors, layouts, and imagery is an important step in the research process, and heatmap experiments are one of the most cost- and time-efficient ways to do it.

Using heatmaps for design testing allows you to identify what works and what doesn’t for any customer-facing visuals.


Package Testing
Most products go through many iterations of packaging designs before launch. Testing various concepts with heat mapping allows you to gain detailed insights into potential customers' preferences surrounding specific packaging attributes.

Respondents have the opportunity to select and react to design elements, logo placements, packaging types, and other details - allowing you to understand where consumers focus their attention and in what order.

Ad & Message Testing
Your go-to-market messaging and content strategy can make or break your product launch. However, message testing isn’t just about the words themselves - the taglines, logos, and other copy in the ad are just as important as the package and product designs.

Using heatmaps, you can test which ad or message garners the most positive or frequent interaction, and which drives more viewers to engage with the Call-to-Action. Consumers indicate to researchers where the messaging is catching their attention, if that attention is positive or negative, and why they feel that way.

Shelf Placement
Even though most of us are primarily shopping online, the in-store experience cannot be overlooked. Pandemics aside, consumers will continue walking into stores for the foreseeable future. By testing how a consumer responds to different shopping environments, you can understand how to maximize value both for the customer and your brand during in-store shopping experiences.

Of course, the shelf is a critical point in the in-store customer journey. Heatmaps are a great way to understand optimal shelf placement and product combinations that will entice consumers to reach for your products. They can also help with the design of the shelf itself!

These are just five primary examples of how heatmaps can enhance your consumer research to provide visual, data-driven insights. They are a quick, fun way for consumers to provide insights in a survey setting, and make a great addition to any research report.

Start exploring new use cases and research projects with heatmaps! And of course, reach out to the team at SightX to learn more.

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