Companies may need price framing research and strategies. We research the most appropriate ways that price is framed in the customers’ mind. Pricing psychology factors heavily in this process, where SIS examines findings with pricing psychology. The importance of price framing emerges when local companies compete against global companies, and when relative pricing is more important than nominal price tags.
What is Conjoint Analysis?
Conjoint Analysis is a technique used in market research that helps to understand how consumers value different attributes in an individual product or service. Such attributes may include tangible such as size, weight, color, etc. and intangible such as price, quality, etc.
Respondents are provided with descriptions of products that would correspond to the attributes of the product being measured. Respondents are then asked to choose between those products based on the attributes. They are then asked to choose again based on a rotation of attributes.
A regression analysis, a type of statistical analysis that compares averages, would then be run on the data for each respondent, resulting in the value of each attribute. Linear or logistic regression can be run depending on the design of the survey. By using a sub-set of all possible products and sets of features, we ask about only a few of the possible products to be able to predict the attractiveness of all possible products.
The following are factors to consider when thinking about Conjoint Analysis:
- Conjoint may not well explain the interaction effects between attributes. Qualitative research can augment understanding in that regard.
- Does not work well if you don’t know the relevant features to include.
- Conjoint is static, and does not explain how things will chain over time.
- Assumes that participants are aware of the features.
Gabor Granger & Van Westendorp Approaches
The Gabor Granger method is a pricing technique in which a respondent is asked how likely they are to buy the product at various stated price levels. All tested prices should be presented in a random order.
There are a few considerations to keep in mind with Gabor Granger. Different market segments can react differently to the same pricing, impacting marketing strategy. Outside of customers’ value considerations, costs and profits impact pricing policy.
Another metric to use is the Van Westendorp PSM (Price Sensitivity Meter), which is a battery of four questions. After being presented a description of the product or service, respondents are then asked:
- At what price would you consider the product a good value? [“Cheap”]
- At what price would you say the product is beginning to get expensive, but you would still consider buying it? [“Expensive”]
- At what price would the product be so expensive that you would never consider it? [“Too Expensive”]
- At what price would the product be so inexpensive that you would doubt its quality? [“Too Cheap”]
Divisions often duel over pricing strategies’ focus, emphasizing different considerations like costs, market pricing, market penetration, profit maximization, differentiation and value. On a global level, standardized pricing may bring success in one region but may bring new challenges in another. If companies implement competitive pricing strategies, competitive reactions may immediately impact sales.
Competitive Pricing Research
SIS conducts Strategy Research to provide data and insights about the competitive reactions to pricing strategies. SIS is a leader in competitive analysis and was a founding member of the SCIP organization, which specializes in Strategic and Competitive Intelligence. We provide War Gaming, Competitive Benchmarking and customized competitive reports related to pricing.