Setting Prices From Your Customers’ Point of View
PriceSet is a research technique developed by GRP to solicit consumer opinion about what prices they consider to be appropriate for a specific concept or product, and to simultaneously estimate overall consumer trial potential.
PriceSet builds upon and extends the widely-known series of price questions first proposed by the economist Peter Van Westendorp. Four price questions are typically asked (question format varies depending on situation):
1. At what price would you consider the product to be so expensive that you would not consider buying it? (Too expensive)
2. 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)
3. 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)
4. At what price would you consider the product to be a bargain-a great buy for the money? (Cheap/Good Value)
We then ask consumers to scale their purchase intent at selected “self stated” prices. In the analytical stage, survey-based purchase intent scores are transformed into purchase probabilities, and a price-demand curve is modeled for each respondent. Finally, all the individual consumer curves are aggregated into a “total market” curve, as shown above.
The final outcome is typically a convex curve that shows a full spectrum of “demand” (% buying, i.e., penetration) percentages across a broad range of prices. Additionally, the estimated number of buyers can be converted into dollars (revenue), in order to gain insight into alternative pricing strategies — what price offers the best overall market penetration, compared to what price optimizes revenue.
To learn more, please contact:
Ray Barber
972.989.0342
ray.barber@globalresearchpartners.com