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?
Several studies have found that women are generally charged more than men for gender-targeted products such as clothing, toiletries and accessories. At a well-known UK clothing retailer, a basic white t-shirt for women costs £12 while it’s just £8 for men, a women’s haircut often costs twice the price of a men’s haircut, and a bottle of shampoo for women is typically much more expensive than a men’s shampoo.
In a previous article, we argued that you shouldn’t be looking to your competitors when setting your price. While this is true, knowing how your product or service is positioned in the mind of your customer will help you understand how you stand out from your competitors. And if you find your product is positioned pretty similar to a competitor, you can use price positioning as a tool to build a strong USP (Unique Selling Proposition) by setting a new price that is relatively higher or lower than your competitors’.
The wording of your marketing message can be incredibly important for your pricing. Here in the US, owners or executives in many small firms have retained companies that oversee their personal pension plans. There are many of these companies, and together they consist of an industry that is called Third Party Administrators, or TPAs. Insurance companies themselves are not allowed to oversee their own plans, but an individual can, of course, oversee, or manage, his or her own plan. But since doing so requires substantial expertise, using a TPA is often a better choice.