A conflation of current events has created both upward and downward pressure on consumer prices—persistent rising inflation posing a risk to demand, combined with disruptions in the supply chain raising production costs at the same time. Simultaneously, many companies are seeing shrinking profit margins meeting potentially slowing demand.
The reflexive course of action during inflationary times would be to simply raise prices to keep pace with currency fluctuations. Similarly, when the cost of production goes up, what’s typically sure to follow is rising retail prices, as some of those increased costs get passed along to the end-buyer.
However, pricing strategies must also take into account other forces as well, such as long-term retention of market share, competitive pricing strategies, and evolving market demand, as well as their own innovations and short- and long-term objectives. Many times, simply raising prices to keep pace with inflation can be counterproductive, especially when other strategies can be considered and pursued.
The Martec Group recently has released a free eBook that examines three such strategies in detail, including some of our own proprietary and unique methodologies. Available for download here, the eBook covers:
- Price-Value Mapping
- Benefit-Value Analysis, a methodology developed by Martec Group
- Competitive Price Benchmarking
In uncertain times, determining the optimal price for your products or updating your pricing strategy can be challenging. However, several research-based tools can help simplify the process and provide market-based insights to ground your decisions in customer-centric data.
You should consider a pricing research study when you are:
- Shifting your pricing strategy
- Developing new products
- Entering new markets
When designed correctly, pricing research can predict customer behavior based on price, as well as the impact a price increase (or decrease) may have on revenue, margins, market share, or customer perceptions. Insights gathered through this type of research can provide the information you need to make informed pricing strategy decisions with greater confidence.
Part One: Price-Value Mapping
Price-Value Mapping explores the relationship between what customers value about your brand or product and the price they are willing to pay. Since “value” can be subjective, it’s not always easy to measure. Yet understanding why and how much customers value your products and services – and recognizing trade-offs they may be willing to make – provides an abundance of knowledge that helps construct the most optimized offerings.
Price-Value Mapping research involves weighing features and benefits against price and value. It shows the performance-vs.-price choice your customers encounter as they evaluate products. For companies, this type of research can define, document, and validate available premiums for key brands.
Three core inputs are used to develop a market-based price-value map:
- Value Drivers: Determining which features are most important and entice customers to pay premium prices
- Perceived Brand Performance: Measuring performance of competing brands in the market
- Pricing Insights: Measuring customers’ willingness to pay among various levels, features, benefits, and brands
Price-Value Mapping provides answers to key strategic pricing and positioning questions:
- What are the value drivers for this product?
- How does our brand perform versus our competition across those key value drivers and loyalty metrics (e.g., awareness)?
- What price/premium allowances exist by brand?
- Where is our brand positioned and perceived relative to competing brands?
- How should we position our brand in the future to capture the value our customers associate with it?
The end-result of the Price-Value Mapping exercise shows where your brand is positioned versus your primary competitors. When it is available, market share also can be shown by changing the “bubble size” for each brand/competitor. Ultimately, the insights from Price-Value Mapping research will identify which specific brand/product attributes to focus on to help you position your brand versus the competition.
Download the eBook, “Pricing Research: How to Effectively Conduct Pricing Studies,” now to see an in-depth explanation of the methodologies applied during Price-Value Mapping research studies. Martec employs a multi-step process to ensure full team engagement, robust and relevant quantitative findings, and timely reporting. Each step in the process is highly iterative and allows for plan and scope adjustment based on the findings.
Price-Value Mapping uses a robust set of tools and methodologies to determine where you and your competitors “live” on the price-value map, including:
- Qualitative Insights are captured both to ensure the right value drivers are measured and answer outstanding “why” questions upon completion of the Price-Value Mapping analysis.
- The Weighted Performance Score uses MaxDiff methodology to determine the importance of the value drivers and scaled response questions to determine customer perceptions of your brand/product.
- The Aggregated/Weighted Price is determined using a Van Westendorp price elasticity analysis and a Gabor-Granger analysis.
A complete definition and description of all three methodologies is provided in the eBook, along with illustrations of the process map applied to such studies.
Companies must continuously find ways to take cost out of their value chain and win the competition for market share—in uncertain times or in relatively more predictable market conditions. Previously, a strategy of high volume and scale based on low-cost labor and transportation has worked, but recent Covid-era issues signal that this is no longer a reliable strategy, as least in the short term (and for who knows how long).
Now is an optimal time to assess and refresh your pricing strategy to better position yourself for what the short-term future holds, as well as to set your company, brand, and products up for growth well into the future.
This is Part One of a three-part series on pricing strategies designed to help companies navigate the future. Other chapters in the eBook cover the concepts of Benefit-Value Analysis and Competitive Price Benchmarking.
To read all three installments in full detail, complete with graphics, illustrations, and applicable case studies, download the full report today.