Pricing Market Research
What can Pricing Market Research Do for My Business?
- Understand what price your products and service can garner in the marketplace
- Learn which features or attributes are worth in an a la carte setting (assuming that your customers could engineer any product that they wanted from your list of all features.
- Understand what competitive products effect the pricing limitations of your products and why. (ie how much of a price premium will your brand get)
- How will different pricing plans affect your market share? Which competitor will benefit from the customers that defect from your product line?
- Are there certain characteristics, features or qualities of competitive products that make their products significantly more attractive than yours?
What is Pricing Market Research?
Pricing research - is a specialized form of marketing research conducted to understand the value of a product in the marketplace. Although there are only two fundamental methods to conduct pricing market research, many companies have trademarked slight derivations of those methods in order to try to distinguish their services from those of competitors. Still, pricing market research can be a fairly complex task, but at it's essence it's all about understanding the value of a product - typically compared to the alternative products in the marketplace. In general the value of a product is dependant on the substitutes or alternative products in the marketplace and how similar the features and capabilities are.
How Does Pricing Market Research Work?
Pricing of a product, with the expectation that it will realistically simulate what would happen in the actual marketplace, there are a large number of moving parts that must be taken into consideration. In most pricing market research projects the respondents are given a number of product options (features, characteristics, brands, prices change from scenario to scenario). The respondent is then asked to identify the product that they would be most likely to purchase.
The critical factors that need to be correctly anticipated in order to make this approach work are:
- The future pricing of competitor's products
- The anticipation of which features and characteristics are going to be incorporated into products included in the competitive set
- The likely response of competitors to your company's change in pricing or feature sets
- That the respondents will have the same breath of products to choose from when actually making their purchase decision.
This sounds like you need to have a crystal ball to conduct a credible product pricing research project. The truth is that it's essentially impossible to get all of these factors exactly right, but there will still be a great deal that can be learned from a project, even though it includes imperfect information.
