Pricing surveys and value research are always of great interest to managers faced with determining the merits of increasing profit margins by raising prices, or the likelihood of increasing revenues by decreasing prices. Online pricing studies can be conducted using a variety of methodological approaches, including price rating scales, Van Westendorp models, and conjoint analyses.
Price Rating Scales
Rating scales are often used to provide graded scales that indicate importance or acceptability of a given concept. Their application within online pricing surveys usually involves determining the degree of importance that consumers attach to a given price level. This approach reports the overall importance of price and not the optimal price for a given product or brand.
Pricing questions or pricing scales can alternatively include the overall acceptability of a series of price points or such measures as the likelihood of trial and the likelihood of purchase at given price points. These pricing measures would be repeated for multiple price points, thereby allowing the researcher to pinpoint the optimal price for a given product. Multiple price points or pricing questions must be used.
In direct measurement scales, respondents are asked what the likelihood would be for them to purchase a product if the price increased by $5, $10, $15, $20, etc. Many different ways to include premium measures into the pricing scale exist and can be implemented for specific pricing studies.
Van Westendorp Model
The Van Westendorp method uses a series of questions to identify key psychological price points. Respondents are asked to report:
- the price at which the product is so cheap that the respondent would question its quality;
- the price at which the product is inexpensive, but not so inexpensive that the respondent would question its quality;
- the price at which the product is expensive, but not so expensive that the respondent would not consider it; and
- the price at which the product is so expensive that the respondent would not consider it.
The price measurements in each of the respective categories provide a distribution of perceptions about the acceptable price of the product. The analysis of these distributions will help answer questions such as what is the average expected price, at what price would we expect purchase intention to drop sharply, and at what point is the price too inexpensive to imbue a quality image.
In order to have an effective Van Westendorp study, you need to create a price scale in which lower is not always better and there is differentiation between users and non-uses of the product. Furthermore, the price-value of the product must be measured so that an accurate view of price perceptions and propensity to buy are included.
Respondents often report preference for an expensive product over a cheaper alternative, but this may not hold true in an actual purchase situation. Validation measures for pricing questionnaires are always essential.
Conjoint Analysis
- Full Profile Conjoint Analysis: uses ratings or rankings of distinct product profiles as the means to estimate pricing effects.
- Self-Explicated Conjoint Analysis: provides a simple alternative to produce utility score estimates equal or superior to other methods.
- Discrete-Choice Conjoint Models: used to determine the influence that both price and product features have on brand value.
Are you serious about pricing research? Give one of our product consultants a call. Our Ph.D.s are experts in advanced analysis and can answer your questions.
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