Value-based pricing requires data and insights. Without understanding what customers value, or are willing to pay, it very easily ends up being just a more sophisticated version of guesswork. Leading companies applying value-based pricing fully understand this. But there is still a trap when it comes to the willingness-to-pay data collected: because market research used to be expensive there could be a tendency to either skip some markets or generalising results from one key market to all other markets.
Perishable goods exist in many forms and situations. There is of course food products that have an expiry date after which they should not be sold. But also event or sports tickets, airline tickets and many other types of businesses. They all have in common that after a certain date the product or service cannot be sold any longer.
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.
Launching new products or services can be a daunting task. With everything from product development, marketing, sales training, customer communication, as well setting the price. Price research can help in various ways with these challenges.
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).
When pricing internationally, pricing research can provide a firm platform for superior performance:
- Understand true differences in willingness-to-pay and don't fall into the trap of harmonizing prices across borders, just because it is easy.
- Understand global as well as local value drivers and adjust marketing messages accordingly. Don't do global marketing on Benefit A, if this benefit is only appreciated in Japan but not in Germany.
- Base local pricing on true willingness-to-pay rather than gut feel.
- Force the pricing team getting closer to local markets and customers, by having to do pricing research in all (key) markets.
- Take the guesswork out of pricing: with price research you know he real market facts instead of guessing.
- Make price increases more successful by reflecting local specifics and willingness-to-pay insights, rather than one-size-fits-all price increases
- As exporters: understand customer dynamics and willingness-to-pay even in markets around the globe and without a large local market team in place.
- Use price research and willingness-to-pay insights as proxies for brand health, and adjust marketing spend levels accordingly.
- Make global or regional product launches more successful by understanding willingness-to-pay in each market ahead of launch.
- Use local willingness-to-pay insights to better negotiate with international customers who are looking to harmonize prices across countries.
Shameless self-promotion: at PriceBeam we specialize in pricing research and provide insights in over 70 countries world-wide. Get in contact or even sign up for a free trial of our powerful price research 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.
Despite the emergence of e-commerce and direct sales, it is still the norm in most consumer goods industries that most of the sales goes through trade partners, either retailers or distributors. For consumer goods manufacturers this means that there is both a price to charge to the retailer and also a price that the retailer charges the final customer. In most jurisdictions it is illegal to directly dictate end-customer pricing, but knowing what the end-customer is willing to pay, and what s(he) values the most, can still be very useful information for the manufacturer as well as for the retailer.