The price of a product or service is a determining element in the consumer’s purchase intention, especially in times of high inflation, where consumption habits change due to price increases. For this reason, it’s essential to perform price testing to offer products and services that fit the brand’s target. Especially in sectors such as FMCG, which tends to experience more price increases in times of high inflation, read on to find out how to determine the most competitive price!
What’s a price test?
The price test of a product or service is market research that allows brands to know consumers’ willingness to pay. In this way, companies can evaluate which pricing strategy is optimal to improve their profitability and competitiveness.
Why should I conduct a pricing test?
Nowadays, the consumer’s choice in any sector is unlimited. To stand out from the competition and increase sales, it’s necessary to differentiate yourself from the rest and offer the consumer an attractive product or service. And one of the key elements to achieve this is price.
Routinely perform tests of products before the launch place to evaluate your marketing strategies or during the life cycle of a product, especially in changing socio-economic contexts such as in times of high inflation. According to a study conducted through the Zinklar platform in six countries, 62% of consumers reported having changed their purchasing habits to make them cope with the rising cost of living. The FMCG sector was one of the sectors that experienced the highest price increases.
Where consumers said they reduced their spending, the most was in clothing, in the shopping cart, and in bars and restaurants. Also, the measures they took were different in each region, sector and category.
It’s crucial for brands to continuously analyze the market and the evolution of consumer behavior to react and adapt to the moment’s needs, especially in pricing. In times of inflation, for example, price is one of the elements that consumers prioritize most when choosing a product. Consumers have to reevaluate their budget since products they’re buying regularly are now more expensive.
In this context, to be able to present an attractive offer, it’s important to carry out a price analysis. This way, you will know how much you can increase the price of your product without losing market share.
In addition to other benefits of price analysis such as:
- Better knowledge, both of consumers and of the market.
- Target segmentation
- Identification of new business opportunities
How to make a price test?
The most effective way to make a price analysis is to ask the consumer. And for this, there are different market research techniques to find out which price ranges best fit your target audience.
Depending on your marketing strategy and objectives, you can use one or another price analysis method. Read on to learn about them in detail.
Pricing test method
- Van Westendorp method, also known as PSM (Price Sensitive Model). This method measures the price sensitivity of a product or service. In it, consumers answer four questions about their purchasing preferences to determine the maximum and minimum price they would pay for the product, thus obtaining the optimum price they would be willing to pay. The Van Westendorp method (WSP) is a simple process that allows a simple evaluation, so it should be noted that this method doesn’t include the analysis of the product’s characteristics.
- Conjoint analysis: this technique provides insight into the consumer’s purchasing preferences according to a product’s attributes. Specifically, it identifies the relative value of each product’s characteristics, the combination of factors that would be most successful among consumers, and, among them, the price they would be willing to pay according to the product’s characteristics. For example, what would you prefer? Pay 2.50 for a soft drink in 50cl can format or buy a 1L plastic bottle of soft drink for 3 euros. Unlike the Van Westendorp method (PSM), Conjoint Analysis allows the price of a product to be analyzed taking into account the product’s characteristics.
- Gabor-Granger: this technique answers the price the consumer is willing to pay for a product on the basis of a previously defined price scale. This analysis allows the construction of a product’s price elasticity curve, identifying both the optimal price and the price thresholds above which consumers would stop buying it. A quick and simple test, although it should be presented that it is a method that doesn’t take into account competitors’ prices.
- BPTO (Brain-Price Trade-Off): this technique, which uses the conjoint methodology, evaluates the brand’s value in the market. To do this, the consumer is presented with different product and brand options and must choose the one most appealing to him. This exercise is repeated several times, and the prices are modified each time, increasing the amount of the product previously selected by the respondent.
This technique makes it possible to infer brand-related preference and its impact on price. It’s, therefore, a study that serves to identify the price of a specific brand and product and makes it possible to obtain the optimal price combination for a group of products.
7 key questions for a pricing test survey
Following the Van Westendorp method (PSM), the type of questions you should include in your questionnaire are:
- At what price would you consider product X to be expensive?
- At what price would you consider product X to be cheap?
- At what price would you stop buying product X because you consider it too expensive?
- At what price would you stop buying product X because you consider it to be too cheap, thus doubting its quality?
An example of a Gabor-Granger method question;
- Would you buy product X at price Y?
If the answer was yes, a second question would be repeated in which the price Y would be replaced by the price Y+1, and so on until a negative answer is reached.
Other questions you can add to your price questionnaire are:
- To what extent would you be willing to buy this product if it were available in your regular store?
- How often do you think you would buy the product if it were available in your usual store?
Through the Zinklar platform you can carry out correct research. With our tool you can ask any of the above-mentioned questions for your price analysis and find the right price for a certain product you want to test. In addition, you can perform monadic tests for your packaging tests, concept tests, etc. Sign up for free!