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1 minute read
When setting the price for a new product*, willingness-to-pay research can be a strong decision support tool. But there are different types of WtP research and different situations that require different methodologies.
- Setting an overall price for a new product or service: Often, new product pricing is as straightforward as setting a single price for that product. A suitable research method removing the guesswork in this situation can be to use WtP questions such as van Westendorp. This can either be as stand-alone or combined with e.g. segmentation questions or additional methods such as choice-based conjoint analysis.
- Identifying customer segments willing to pay a higher price than other segments, and adjusting the offering accordingly: A way of enhancing the basic WtP research above is to combine the set of WtP questions with one or more segmentation questions. The outcome is differentiated willingness-to-pay values, per customer segment. This can be used to identify higher paying customer segments, but also to better understand what customers are willing to pay a higher price than others, which again can be used to differentiate the product offering into several price tiers.
- Configuring the optimal feature set versus price: Choice-based Conjoint Analysis shows a series of product options with different features, and asks respondents what option they prefer. By recording each choice, it is possible to determine how much value the respondents put on each individual feature. Put into pricing context, it means you can predict willingness-to-pay for specific feature combinations as well as determine what features will be considered most valuable. This in turn can be used in value communication, highlighting those specific high-paying features. In a longer time perspective the same insights can also be used for continuous product improvements.
- Concept testing:When innovating it can sometimes be useful to compare different product concepts. Willingness-to-pay research can also help here, bycomparing WtP for different conceptual offerings. Again, it can also be combined with any of the above methods, such as segmentation, to gain further insights.
PriceBeam has solutions for all of the above types of pricing research. Get in touch to talk about your specific needs when pricing new products or services.
* as readers of this blog will know, we always use "Product" and "Service" interchangeably. So "Product" may very well also cover service situations.
