Taking the Guesswork out of Pricing
What scientists want and what they are willing to pay for are often two different things. Scientists make feature/price trade-offs to determine which product configuration will meet their needs. If a product—even one of superior quality—fails to meet a customer’s value requirement, it will likely not be selected among other products. Your product—regardless of quality—will remain on the shelf if your target market is unwilling to accept the cost required to buy it.
Companies in the same market regularly speculate and shift price points to optimize profits and remain competitive—not an easy task. In his informative article in Admap, Michael Lieberman, founder and president of Multivariate Solutions, aptly uses the term “toolbox” to describe the variety of models used to determine optimal pricing. It is critical for companies to remove the guesswork from pricing by performing multiple analyses to assess current pricing, find optimal price points, and draw attention to changes in competitor pricing.
One of the tools we use to gauge revenues at multiple price points is an online calculator embedded in a survey questionnaire. This type of “slider” ensures that all respondents are estimating demand and cost in the same way, which helps to determine optimal price and predict profit for new and existing products.