Pricing Research and Practicalities

As market researchers we have an array of tools available to help companies get market input on pricing their products and services. Rajan Sambandam lays out a number of options based on elicitation method and where you are in the development cycle. All things being equal, we are quick to recommend conjoint because this powerful tool provides a depth and breadth of information and insights not available in other methodologies. But conjoint isn’t always feasible. There are practical considerations to keep in mind.

What’s your assumed product price range

If you are launching into a marketplace with well-established product pricing, you may have a narrow range of pricing options to consider. If you’re charting new territory, you may have less of a handle on how much you can charge. To design a conjoint exercise, you need to know the price points to test in advance. If you miss testing the sweet spot you’ll need to revisit your assumptions. A Van Westendorp Price Sensitivity Meter on the other hand allows the price points to be defined by the survey participants. Of course, their suggestions may not align with your reality. Consider a PSM early in the research process to narrow the range of prices to use in a conjoint or ladder exercise later on.

How big is your respondent pool

You have many more pricing research options available to you when you have a vast respondent universe as opposed to a limited (or expensive) respondent base. Monadic design and conjoint will likely require greater numbers of respondents than a price ladder. You may need to be flexible regarding method based on how difficult or expensive it is to recruit your intended audience.

How well-defined is your product

You may have a large respondent pool and a clearly defined range of price points to test, but if your product has nebulously defined features and levels, a conjoint study won’t work for you. Not that we advise going into any research project without a clear product description, but conjoint will suffer far greater than methods that don’t directly include the product design elements in the pricing exercise.

How much time do you have

Are you going to market in the next few weeks? Conjoint analysis requires more time due to its complex process, including design, fieldwork, and analysis. Alternatively, more agile, straightforward methodologies like monadic design offer quicker results.

With these considerations you can move more confidently toward choosing an appropriate pricing research method.