Your brand is your promise to your customers. It’s what they are expecting from you when buying your goods or services. Pricing is just as important to brand equity as other differentiators, as one function of a price is that it conveys a quality message and therefore, can influence the conceptual place your brand takes in the target consumer’s mind.
How many products should there be in an assortment, and how should they be priced individually? Does adding more products change the dynamics or psychology of customer choice? Or are there too many products that neither the customers nor the production department really can cope with?
This is a challenge in many industries. Classically, consumer goods manufacturers go through an assortment optimization (read: reduction of number of products) every few years as they also add many new innovations. But all kinds of other industries have similar challenges: how many car models to offer? What kind of software packages / plans should a Software-as-a-Service vendor offer?
The revenue growth management and pricing disciplines are in constant growth, with more and more companies seeing that revenue and price optimization can deliver additional profit growth as well as help with managing the overall market position.
What should the next price be? for a new product about to be launched? or an existing service where one wants to increase the price for any number of reasons? The facts are that in 88% of all cases the price setting process inside a company is largely based on guesswork and gut feeling rather than science. Or simply based on the previous price.
Marketing teams face annual budgets for their various investments in brand equity creation, product development, promotions, advertising and much more. Price research can contribute in a number of highly valuable ways when it comes to these decisions.
1. Understand if the brand (or individual product) is considered over-valued or under-valued by the customers: Willingness-to-pay research is a great indicator of how much value customers associate with the brand in comparison to the current price. Take an example like this chart from the PriceBeam solution:
In many organizations this is the time of the year for making marketing budgets. Marketing teams build plans for the coming year and petition various stakeholders for (additional) funds.
Willingness-to-pay research can be very useful to plan and defend marketing budgets, and the starting point can be something as straightforward as this:
If a product has a current price that is higher than the value customers put on it (i.e. their willingness to pay), then that product is over-priced. Similarly, if the current price is lower than what customers are willing to pay, then it is under-priced.
Willingness-to-pay insights can easily and rapidly be identified using PriceBeam's solutions.
Even before Philip Kotler wrote his famous book about the 4P's in marketing, pricing was very important to marketers. Pricing determines how much money is made, but pricing also sends signals to the customers about the value of the product or service. It sets the level of premiumness and expected quality, and it often also communicates about how the product should be perceived vis-a-vis competition. Therefore, Marketing should also be very much involved in pricing.
Your product is awesome, and you know it. Features X, Y, and Z make your customers’ lives so much easier that they should be naming their new-born child after you. So why don’t they?