After months and/or years of product development, thinking, engineering and toiling on the fruits of your labor, you get to the point when it is time to bring the product to market. Questions tend to arise like “Is what I have created a value brand? Mid market? Or, hopefully, a premium? Maybe even the Yeti of the category?” This is where things get difficult. Maybe an online survey can get you closer to the answers you need.
You, of course, are the creator, the innovator that has brought to life a new product or service. And you have reached the point to determine that the product/service is viable. So, now is the time for consumer research to deliver you the answers you need—price being of primary importance. In the steps to follow, we will outline a strategy to get the opinions of the audiences that matter; delicately balancing the opinion of the creator and innovator who has poured hours of blood, sweat and tears into a what you believe to game changing vs. that of the potential consumer who may be your harshest critic (but hopefully your biggest fan).
Ultimately, we will answer the question of price. However, there is information that we must tease out before we can get to that conclusion.
Step One: Define the Product/Service
You, having invested the time and energy into the product/service, have a biased point-of-view regarding the value of said product/service. Rightfully so, because in your mind, there is a clearly established market or “Blue Ocean” (thank you W. Chan Kim and Renee Mauborgne, authors/brilliant minds behind Blue Ocean Strategy) for your product/service to thrive.
This should allow for the development of the crystal clear description and definition of your MVP (minimum viable product) for you to use during market/consumer research. These 3-6 well-crafted sentences should provide the audience a clear understanding of the product/service, the brand and it’s positioning. Ultimately, this paragraph delivers the essence of your product/service. This information will be used in the development and execution of the survey targeting your potential audiences.
In executing this step, remember that marketing is part art, part science. And in both, you seek truth. And truth is something different to each and every person. So be prepared to ask the opinions of people close to your project. Listen to their feedback. Analyze. And adjust/tweak – all for the sake of success.
Step Two: Develop the Survey Instrument
Developing a consumer research questionnaire is tricky. Just as is questioning a witness on trial in front of jury. Ask the question in a wrong way and you get bad/biased information. Ask a witness the wrong question and you potentially lose. In either case, it’s a bad outcome.
This is where professional help becomes important. And collaboration is key. Whether you are working with a research partner or developing the research on your own, always – as you write the survey – put yourself in the perspective of the respondent to the survey. Understand the how the answer to the question will deliver the information you seek. Work with a colleague close to the project to keep you focused and thinking in proper perspective. Challenge yourself to find bias. Take the opposing point-of-view. Try to disprove your thesis. This, although painfully frustrating at times, will prove to be of great value in the long run.
Side Note
Use a mixture of quantitative and qualitative questions. Quantitative data should give you a clear understanding of audience potential adoption/acceptance/potential of your audience to buy your product. These are the facts that are critically important to determine viability of your product moving forward. Qualitative questions, on the other hand, give you deep insight as to “why” the respondent believes what they believe. They tend to dive deeper into behaviors and motivations of the respondent versus a yes/no or 5 out of 7 response. This is the place to get deep insights into the minds of the consumer because they are giving you their perspective as opposed to a biased or guided response.
Step Three: Find the Right People to Take the Survey
You want to find your audience. Right? Narrow the database of respondents down to as close as you can get to your actual or potential target audience. Find the segments that will buy your products. Talk to them. Seek their opinions.
This, dependent on the life stage of your product/service, may be difficult – specifically if it is a new entry and or a new category and the target audience has yet to be clearly defined. But, it is also an area that research can illuminate. (see quantitative section above)
Step Four: Pricing
At this point, we have a clearly defined product/service. We have developed an unbiased survey and found the right group of people to take the survey.
So, now we get to the point of price – what a buyer is willing to pay for your product or service. Set the price to high, and they won’t buy your product. Too low, and you have left money on the table. The methodology that we recommend deploying is the Van Westendorp Pricing Sensitivity model. This model asks four very simple questions. However, we have to remember how they respond is based on the bias we have intentionally introduced through the earlier questions and clear product description.
- At what price would you consider the product to be so expensive that you would not consider buying it (too expensive)? Think about this one from the audiences point-of-view. They should answer this question from the perspective of “I would never, ever, in my life pay that much for this product,” which firmly establishes the “high end” boundary for a potential buyer.
- At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good (too cheap)? This answer should establish the exact opposite, “I would never, ever, in my life pay this little for this product, because it makes me think it is too cheap to be with it,” which firmly establishes the “low end” boundary for a potential buyer.
So, in your mind – visually – imagine at this point we have a graph of the range of values depicting what a willing consumer – your audience – would be willing to pay for your product or service, making an X on the graph. So, where those two lines meet give you an idea of where you need to be price wise. However, we are going to dig deeper.
- At what price would you consider the product starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it (Expensive/High Side)? Here we are asking the respondent to consider what the high end of what they would pay; so, not what is too high but, rather, what is the high end they would be willing to pay?
- At what price would you consider the product to be a bargain—a great buy for the money (Cheap/Good Value)? Similar to the above question, but we are looking for the consumer to advise us what they would consider to be a good value for the your product or service.
Once the data is collected and sorted, we can create a graph like the one represented above. The area where the lines intersect is the primary area of our focus giving us the following:
- Point of marginal cheapness – This is the point where more sales would be lost because more people would question the quality than would potentially be gained from bargain hunters.
- Point of marginal expensiveness – This is the point where people consider cost to be serious concern, where the value equation becomes unbalanced due the cost.
- Optimum price point – At this price point, the percentage of customers that feel the product is too expensive is the same as those who feel it is too cheap and shifting the perception of quality.
- Indifference price point – This is the point that the same number of people feels that the product is getting too expensive as those who feel it is at a bargain price or a good value. This is the point at which most customers are indifferent to the price.
The Van Westendorp Pricing Sensitivity model can develop extremely valuable information to researchers looking to establish a data based pricing structure. This structure can guide the decision to increase or decrease pricing for products/services in a wide variety of life stages – from start-up/launch to mature. An important consideration for this process is to remember that because the respondents are advising you of their pricing considerations, it does not mean they would actually buy.
So, either:
- As part of this process
- As a separate study once you have uncovered the optimum price point
- Or if you know the price you must attain in order to maintain a viable business
always remember to ask the question, “Are you buying a price or X product for X price?” This will give a strong view of pricing as well as overall market potential/viability.
Could your company benefit from the Van Westendorp Pricing Sensitivity model pricing exercise? At The Brandon Agency, our team of certified brand strategists and data-driven marketing experts has a wealth of experience helping brands in all stages of the process. Further, TBA’s fully integrated marketing firm can cover the full spectrum of your brand’s marketing needs, including brand strategy, web design, creative, media, e-commerce, analytics, social media, SEO, conversion rate optimization, and more. Want to know more? Contact us today.