The end of the year remains the time where many businesses plan and execute price increases for the coming year. By how much, when and what product or market scope are then key questions. By getting market facts through price research instead of guessing what are the best areas to increase in, companies can improve the likely success of such increases tremendously. It can help a business get a firm grip on what product features are more important, what customer are willing to pay for a certain product or service, and analyse what competitors are charging for their products.
Barriers to entry and the difficulty of doing business abroad have reduced considerably over the last two decades, thanks to technologies such as the Internet. This means it is much easier to do business around the globe but also that brand and product communication is increasingly global. Customers or consumers in Germany can now see product features, prices and discounts offered in USA or Singapore, and may create bad publicity if they feel that what they pay for locally is not of the same value. International prices are also considerably more transparent than ever before. On the other hand, both willingness-to-pay and actual prices do differ considerably around the globe, be it of similar of even identical products. What an Indian or Brazilian customer is willing to pay for Product A may not be the same. Or, a German customer may value Feature B over Feature A whereas the Canadian or Danish customer really only cares about Feature B and maybe Feature C that is not even available in Germany.
Dynamic pricing is all the rage among pricing experts these days. It looks at building models for adjusting prices dynamically, based on various inputs, from who the customer is, to their purchase patterns, market conditions and a wealth of other factors. Dynamic pricing has been used a long time in the travel industry, e.g. when the airline fare goes up or down depending on demand, from where people are booking, availability and popularity, and much more.
Dynamic pricing is very powerful as it allows companies to set the (right) price depending on demand or internal constraints. It also in theory allows for adjusting to differences in willingness-to-pay, even if this is a grey area in the jurisdictions where price discrimination (different prices to different customers for no objective reason) is not permitted. Dynamic pricing means you can adapt quickly to differences in stock, or scarce capacity of certain resources. It also allows for quickly updating prices if costs change so much that profitability would otherwise be in jeopardy.
Dynamic models in their simplest form, basically take a starting point and then add various factors, either internal or external, and then arrive at the final price for the given situation/quote/customer/website update/etc.
Having solid market research about willingness-to-pay can enhance dynamic pricing models. Willingness-to-pay data, especially when collected for different segments, and both own products and competitive products, can help enhance the dynamic pricing. WtP data can be one or more factors in a model like the one above, and therefore have an impact on what the final price is for a specific segment, or for a specific concept that previously has been tested through market research.
But wait, if dynamic prices mean new prices all the time, do I also need to conduct market research all the time too? No, is the short answer. Factors in a dynamic pricing model often stay constant for weeks or months. So in practical terms you can still use market research willingness-to-pay insights that was done 6 or 12 months ago, and still achieve great results. Generally, we recommend updating WtP insights at least once a year.
If you want to learn more about how you can build a dynamic pricing model and use market research insights to make it more accurate, get in contact with us.
Communication is key in any comprehensive price management setup. Price and Value Communication is how you communicate with the customers, and communication and training is what makes the difference between convinced sales people, who deliver value conviction to the customers, and sales people who are indifferent and not able to defend the company's prices.
OK, so of course your product or service has a price. A price that reflects what you think is a fair price for the value you deliver to the customers(?). But do the customers see it the same way? And do you charge appropriate prices for what the customers value, or is it disjointed?
This is the time of year when many companies are planning or executing price increases for the new year. Some are successful and reap considerable improvements in profitability. Others have difficulty in making the price increase stick. And others simply fail to implement a price increase.
Over many years working in the pricing industry, I have seen a number of things that successful companies do when it comes to implementing the price increases. Here are some of those insights.
"Can we include competitor prices into the price research?" is one of the more frequently asked questions at PriceBeam. The answer is a loud "yes", but sometimes the second question should be: do competitor prices matter?
The answer is "most of the time". But sometimes the focus is too much on competitors compared with the adequate attention to how you deliver value to your customers. Competitor prices do matter, because they set a reference against which your value is being compared. In value-based pricing models there is often a NBCA (Next Best Competitive Alternative) to which value drivers are added or subtracted, to arrive at the value of your own product.
But products also deliver value on their own. If your product or service helps your customers, it does so regardless if the competitor is priced high or low, or doesn't even exist. And this is where too strong a focus on competitive pricing can become an issue. In organizations overly obsessed with competitive prices there is a tendency to only focus on how their own price compares with that of the competition. Conversely, they don't focus enough on delivering independent value through product benefits and features.
PriceBeam's price research methods focus both on your own value-based pricing and customers' willingness to pay for that value, but also allows you to bring competitive WtP analytics in play. The outcome is a solid understanding of your own value and pricing opportunities, while keeping a health eye on the competition.
About to launch a new product? Or updating the positioning of your existing service? Using pricing research can help determining the value that customers perceive, before the actual launch.
Price research asks existing or potential customers about their willingness-to-pay. This is in itself powerful and will help marketers understand how customers respond to their value proposition. But repeating the willingness-to-pay research across multiple concepts or with competitive propositions, it is also possible to test different concepts against each other.
PriceBeam has recently launched a Comparative Willingness-to-Pay study type, that does exactly that:
- You define the target market, such as country, demographics and other restrictions
- You describe a set of product/service concepts.This can be different iterations of your offering, but also include several competitive offerings.
- PriceBeam does all the hard work and conducts the market research. We ask them a series of pricing questions for each product concept and thus collect comparative data.
- You can analyze willingness-to-pay of the individual offerings, but also compare the different WtP data sets. This allows you to see what market segments respond favourably to different value propositions or product configurations.
The new PriceBeam Comparative Willingness-to-Pay study type has been tested by some of the largest companies in e.g. FMCG/CPG and hospitality, and is now being used to determine pricing for various product launches in 2018.
Let us organize a quick online demo and show you we can help you.
Price Research benefits the marketing team as well as the pricing department: they get insights into willingness-to-pay and can better determine the optimal price. But what about Sales? In a recent sales conversation we were asked if price research could be used when e.g. putting price increases through. The short answer is "Yes". The longer answer is it depends. (And the legal answer is: yes, but don't dictate resale prices).