As companies continue on their business journey it’s always a good idea to explore new strategic opportunities that generate positive ROIs. Many companies are increasingly turning to pricing research to maximize profit and with good reason. Given its scientific accuracy, it is a reliable way to optimize pricing strategy and redefine positioning in a market. Besides, sound pricing research can make the difference between a successful product/service or a flop.

This article aims to provide an overview of pricing research and explain how it can be applied for long-term business growth.

What is Pricing Research?

Pricing research is a research method that aims to discover customers’ willingness to pay for a product or a service. The goal of pricing research is to measure the impact of change in prices on the demand of any offering as well as to determine the optimal price for new products. With customer insights, organizations can optimize  customer response to the new price and discover the psychological effects of price points on sales (demand).

Solutions for Offerings that Pricing Research Provides:

• New Product Pricing Insights
• Developing a Subscription Pricing Model
• Product Portfolio Pricing Optimization
• Menu Bundling & Optimization
• Pricing Configurable Products & Services
• Competitive Pricing Response
• Promotion Effectiveness

So, whether a company is planning to increase prices or pricing a new product, research is the key to effective pricing strategy and informed business decisions.

What Are the Types of Pricing Research?

What Challenges Can Pricing Research Address?

How to Conduct Pricing Research?

So clearly, pricing research can go a long way in helping companies discover and create new business opportunities. But how to make sure pricing research is conducted correctly? The following are the “Five Cardinal Rules of Pricing Research.”

1. Define the Research Purpose

• Understand the who, what, why, where, when and how behind your customers’ pricing decisions.
• Focus on capturing the following elements of the buying process into the research design: , frequency of purchase, key decision maker, and length of the buying process.

2. Know Your Tools

• Not all tools are created equally: no two methods are exactly alike and no one method can be used all the time
• The key is to match the data collection method to the pricing problem for which you are seeking input.

3. Understand How Your Customers Perceive Price

• Understanding how your customers view price in the context of their purchase is critical to effective pricing research design.
• Example: when the price is high, the customer’s reaction can be different: “sticker shock” or prestigious image?

4. Use Research to Sell – Not Just Set Price – Support Your Sales Team

• Take time to nurture your sales representatives and offer them full communication of the pricing research to help support any adjustments to pricing strategy.

5. Use Segmentation to Select – andReject – Potential Customers

• Price segmentation is often used to identify which group of customers is the “best” to serve
• Many companies can’t resist the temptation to sell their product or service to the whole market, in a misguided attempt to grab volume.
• Consequently, these organizations get dragged down by serving the unprofitable “cherry pickers” at the expense of their profitable “core customers.”

Case Studies: Companies that Improved Revenues with Pricing Research

Over the course of 25+ years, we have helped thousands of companies optimize their pricing processes, and pricing research has been a crucial element of virtually all projects. Here are a couple of examples of how our clients across different industries generated positive ROIs with the help of pricing research:

• IoT Case Study

Our client was a +30B multinational conglomerate who created a new cutting-edge IoT platform but was not sure how to commercialize the technology since it was no longer just a “product”. The company partnered with Pricing Solutions to build a pricing framework which would encourage customers to start adopting the product in less time. Our team conducted qualitative interviews with the product management team and existing customers that helped to develop a Price Volume Optimizer simulation model. By the end of the project, the Pricing Solutions team delivered to the client a new price structure that enabled the broad adoption of the IoT platform across the customer base.

Read more: Launching a Breakthrough IoT Product with a Customer-Centric Pricing Strategy

• Software As A Service (SaaS) Case Study

The client had upgraded their current hardware and software technology and wanted to know whether a subscription pricing model would be embraced by their customers. Our team conducted internal interviews with key stakeholders within the organization and evaluated alternative pricing models with the help of market research. The customer research revealed that over 75% of customers would be open to a new subscription model. Based on the compiled research insights, Pricing Solutions developed a pricing simulation model that offered a potential 18% increase in revenue per customer over 4 years.

Read more: Moving to a Subscription Based Model to Reveal Potential Revenue

• Restaurant and QSR Case Study

To keep up with the competition, this client wanted to re-gain control of its pricing and eliminate addictive discounting. The restaurant chain partnered with Pricing Solutions to improve margins and gain the right customer insights to make informed pricing decisions. Our approach included customer research that uncovered key value drivers and the role pricing played in the purchase decision. Based on these findings, we built pricing strategy recommendations that predicted to recover the approximate 5% in annual revenue and margin that was being lost under the client’s initial discounting strategy.

Read more: Developing a Pricing Strategy that Grows Profits and Guest Count

• Pharmaceutical Case Study

For pharmaceutical companies, setting an optimal launch price requires a strong understanding of current market conditions. After heavily investing in innovating a product, the team of one of the world’s top 20 largest pharmaceutical companies—appointed Pricing Solutions to help them map the route to market. After undertaking primary and secondary pricing research, we were able to give the client a clear recommendation on price. Due to the quality of the research, analysis and modeling that went into the recommendation, the client had the confidence to take these recommendations and push for a higher price than they were initially thinking of prior to the project.

Read more: Pricing Research Provides the Confidence to Launch New Products at Fair Prices Businesses should constantly be looking for ways to increase profits and better optimize every aspect of their operation. One proven way to do so is by evaluating pricing strategies to make sure they maximize profits. By conducting pricing research, companies are able to make better pricing decisions and dramatically boost profits. If you’d like to know more about increasing the profitability of your company through pricing research, get in touch with us today.