Wilson Research Group Blog

“Sweet Spot” Pricing Research: Too Much, Reasonable, Bargain and Steal.

Do you need to know the “best” price to charge for a product or service? Here is a practical way to get after this issue without spending a mint.

It is too simplified and misleading to list a series of attributes/pricings and ask for a rating on a scale of 1 to 7 as to which are most important. All items will likely skew towards the higher ratings, because the person doing the rating does not have to trade anything off, so she does not lose anything by rating all attributes high.

On the other hand going into advanced “conjoint analysis” or “max diff” analysis where trade-offs are analyzed ad infinitum to reach a price point about various product attribute mixes has its shortcomings as well. It is a costly research maneuver requiring specialists and research expertise that is beyond most clients. It can suck up all the time and energy of a survey and not allow for other types of important questions from this audience, and it can still be misleading.

More reasonably, if you can explain a product fairly simply with its main attributes, you can ask a question that tries NOT to find out which attributes are most desired, but what is the package price at which people “tune out”, “tune in”, are “attracted”, and are “smitten”. These are human dimensions that we all experience when we shop. These reactions send (or suppress sending) dopamines to the synapses (true). (See our “Brainy Decisions” blog.)

Buyers almost always consider “cost” as one of the most important considerations in a purchase. Based on our 20 years of research experience, they almost always do not consider cost to be the “most” important consideration. In our experience, it is usually ranked third or fourth most important, after other attributes like “quality”, “performance”, “style”, “durability”, “reliability”, “brand”, and so on.

Respondents in real buying situations can only seriously consider four or five key attributes of any product or service. After that, differences in attributes start to blend together or fade completely. So a way of keeping pricing questions real and keeping the respondent from low-balling a pricing question, is to ask the following type of questions.

1. For (product A), at what price would you consider this product…
a. To be too much or “overpriced” and would definitely not purchase this product $_____
b. To be a “reasonable” price and would likely consider purchasing this product $_____
c. To be a “bargain” price and would definitely consider purchasing this product $_____
d. To be a no-brainer “steal” at a price that is almost too good to be true $_____

2. For (product B), at what price would you consider this product…
a. To be too much or “overpriced” and would definitely not purchase this product $_____
b. To be a “reasonable” price and would likely consider purchasing this product $_____
c. To be a “bargain” price and would definitely consider purchasing this product $_____
d. To be a no-brainer “steal” at a price that is almost too good to be true $_____

This style of questioning for two or more combinations of attributes can provide a very accurate picture of what the audience values, and also fits into the respondent’s way of thinking about pricing, as most people think of these categories (overpriced, reasonably priced, bargain, steal) in almost all buying situations where they have done even the most minimal shopping.

Bottom Line:
In designing questions to understand the “sweet spot” in a market (not too much and not too little), we consider first how most people think when they purchase products or services. Although “price” is usually not the first or foremost attribute people consider (“quality”, “performance”, “reliability”, “durability”, “style” and “brand” are often higher rated attributes), when they do get down to the price (almost always ranked among the top four attributes) buyers get turned on or off by their own internal human measuring system of “too much, about right, bargain or steal.”

(See also our blog “Brainy Decisions”, our web page on Startups where we have actually used these techniques, and our page on the Data Robotics Drobo startup.)

For more information on pricing, tell us about your project , or email Larry@wilsonresearch.com for a complementary discussion of your pricing research needs.