Analyses for optimum pricing
First and foremost, a product's price is intended to maximize the contribution margin. It is therefore crucial to identify the sales opportunities at different price levels. But the price has other functions, too: It communicates something about the product and hence contributes to its positioning (e.g. as "bargain" or "upmarket"). Our pricing research provides you with precise insight into which price will best fulfil your goals in accordance with your product and brand strategy, giving you the certainty that your products will enjoy long-term market success.
- Does the customer already have an idea of how high the price may be? How are different prices perceived?
- How important is the price in comparison with other product features?
- How much are potential buyers willing to pay? Are there sensitivity thresholds? What's the level of price elasticity?
- Which price yields the greatest profits if unit costs are considered?
- Which price suits the product and brand strategy?
- What benefit will threshold prices yield?
A conjoint analysis is the core of our pricing research, as this method is best suited for determining price relevance in comparison with other product features. Furthermore, the results help understand the price point at which the interviewed buyers would change their selection behaviour. An overall consideration of all respondents therefore enables the identification of the price elasticities.
Unfortunately, however, even the most precise conjoint analyses can lead to misapprehensions. This is why NORDLIGHT research always applies a multi-methodical approach in pricing studies. In addition to a conjoint analysis, this includes the methods of Van Westendorp and Gabor-Granger, resp. adjusted purchasing intentions.
We simulate decisions made under time constraints for determining the influence of threshold prices in particular (reaction time paradigm). This effectively deactivates the influence of rational considerations, thus demonstrating the efficacy of threshold pricing in terms of less conscious product pre-selection (i.e. the establishment of a relevant set).
- We summarize the results of our multi-methodical approach to define one recommendation.
- Together with you, we develop the weighting for determining to which extent the different criteria (sales, profit maximization and price perception) influence the recommendation.
- Each recommendation and each summarized overall assessment can be broken down and evaluated on the basis of individual judgements.
- This way, you can understand the price range in which your product can be positioned, the sales expected at the various price points, how the price perception will change across different price points, and the extent to which price elasticity exists at different price points.
- We are also happy to include your in-house parameters (e.g. unit costs) and integrate them in our analyses, for instance to elucidate the possible profits at various price points instead of considering sales alone.
- We cater to your wishes in the documentation we provide – be it PowerPoint chart reports, tabled results in Excel or interactive simulation tools.