Pricing Challenge and How to effective pricing your product

Brand Price Trade Off, marketing researchers allow consumers to choose product/service from a group of products/ services

Pricing strategy is a critical challenge to marketers because it directly affects how consumers’ perception to product or service. If the product / service is priced too high, sales will be slope down rapidly, or worse when consumers will switch to substitutions. Therefore, pricing optimization becomes more vital to marketers.

To overcome pricing challenge, marketing researchers apply research methods to identify the price that satisfy consumers’ expectation: pricing the product competitively and pricing the product individually.

Pricing the product competitively (Brand Price Trade Off – Discrete Choice Models)

Marketers attempt to price product/ service competitively when assessing existing products or when the new product innovation falls outside of their typical new product development testing program. Most frequently new innovations fall outside of the program when:

·                     The decision to introduce the product has been made and specific market decisions such as placement and pricing are left to be determined

·                     Innovations are new enough that competitive context better defines the innovation in terms of price and usage

·                     Price is only one of a number of product features that need to be determined as an optimal offer.

Brand price trade off - BPTO:

In Brand Price Trade Off, marketing researchers allow consumers to choose product/service from a group of products/ services. Then, in the next step, consumers choose product/service from group of products/ services at different price. Marketing researchers repeat this test 5-10 times per consumer to identify the highest price that consumers are willing to pay for that particular product/ service.

BPTO is most effective for competitive situations where the issues are limited to simply price and brand. Applicable in a competitive framework and the simplicity of the task for both consumers and questionnaire developers are some competitive advantage of BPTO to other pricing research method.

(To be continued)

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Compiled by AMR Group (Marketing Research in Vietnam-Nghien Cuu Thi Truong Viet Nam) on 2014

Source: Strategic Initatives

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For more details of Brand price trade off:

Brandprice trade off – a perfect measurement for your pricing strategy

Marketingresearch – brand price trade off