Value Pricing & Price Optimization
Ready to think about value pricing?
The right price of a product is a value that is the closest to the real value of the product. This is determined by how the product delivers its value proposition. Pricing very high and above that fair price will drive away customers and alienate current brand users. Whereas charging below that price may dent profits and make the product appear too cheap to deliver the value promised. Either way, the competition will respond, thus making pricing a more arduous task than it seems. Pricing strategy is merely optimizing the price of a product or service in a way that justifies the value that it brings on the table and is competitive in the market. Though the company may decide using one of the four established pricing strategies – penetrating, premium, skimming, or economy, it is always helpful to test it, as value pricing is essential.
Value pricing is generally the price that is considered by your customers optimum as they compare it with competition in the market. Product performance forms a large part of what customers perceive the products’ price to be. Hence with average performance in the category, a product can only garner no more (and no less) than an average price. If your product has a significant competitive edge and you can demonstrate it, customers should be willing to pay a premium.
Performance measurement and pricing is best evaluated using a combination of Discrete Choice Modeling (DCM Exercise) and performance value map exercise.
Discrete Choice Modeling is generally one of the most effective methods of conducting a price volume sensitivity exercise. DCM offers competitive pricing situations because the study design can be specified and adjusted from a simple brand price trade-off type estimation to a design that will create interaction estimates for issues like price and product availability. Discrete Choice Models (DCM) also provide the most comprehensive simulators to understand pricing scenario building. DCM pricing models can be used to create the most straightforward price-only simulators to full market share tools.
Apart from DCM, we also offer other methods of pricing analysis, which include –
- Price Sensitivity Measurement (Van Westerndrop)
- Pricing Threshold Measurement (Gabor Granger)
Methodologies used –
- Quantitative Face to Face surveys
- Common Location Tests
- Usage Experience Surveys