What are my options when it comes to pricing research?
We’ve already covered two popular pricing techniques – Van Westendorp’s price sensitivity meter and conjoint analysis. Van Westendorp’s price sensitivity meter is well suited to new products by building a holistic picture of acceptable and optimum prices, but it doesn’t account for a competitive marketplace. Conjoint reflects the consumer decision making process more realistically and is particularly useful for products with a range of features, but it could be overkill for simpler products or where value is very heavily tied to the brand.
Enter the two other main contenders for pricing research, Gabor Granger and brand price trade off. Gabor Granger is at the simpler end of pricing research and shows price elasticity by capturing likelihood to purchase at a range of price points, again without a view of the competitive set. Brand price trade off (BPTO) reflects market share and shows the relative influence of price and brand in a purchasing decision. For this reason, it wouldn’t be a very useful technique for a product that’s new to market or in a niche category, but it can be extremely useful when a product or service is similar to competitors and brand affinity or price point are key purchase drivers.
How does brand price trade off work?
Within your online survey, respondents are presented with a range of brands (normally between three and five), and a ‘none’ answer option. Each brand is shown with a price point, and respondents are asked to choose the brand they would purchase or are free to choose the ‘none’ option. Every time a brand is chosen, the price for only that brand increases. This continues until the respondent switches to another brand, or the ‘none’ option, revealing the point at which their desire for that brand is outweighed by their perception of an unacceptable price point. A randomised design can be used to make the format of the question less apparent to respondents, but the principles are the same – respondents are asked to choose a brand from a range of brands at given price points.
Sounds fun, but what does brand price trade off tell me?
I think brand price trade off questions must be among the more fun to answer in a survey, but maybe people who don’t work in market research don’t think of survey questions as fun… Either way, brand price trade off can be insightful! Similarly to conjoint analysis, by analysing the decisions respondents are making we can use brand price trade off to model the marketplace, calculating how changing the price point will impact market share and what the optimum price point is as a result. The results also help you understand the value that consumers place in your brand and the incremental value a premium brand is able to generate by commanding a higher price point.
