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Pricing ResearchObvious risks are involved when pricing new products or services, or changing existing prices. Setting the price too high or too low will result in lower profits.
Typically pricing decisions involve analysis of historical data, competitive benchmarking and a healthy dose of managerial judgment. They should also involve research among buyers, because understanding price elasticity allows more informed decision-making.
Pricing research can be imperfect because people spend money in surveys more liberally than they spend them in the real world. Nonetheless, Maritz Research believes that some pricing methods work better than others and a designed experiment (a discrete choice experiment) often works best.
A designed choice puts the respondent in a realistic situation where he can trade-off the various features of a product/service versus price, and it provides valuable information on all of the variables tested.
Although designed choice experiments are the current gold standard in pricing research, not all situations lend themselves to this approach. Another kind of pricing research might be more appropriate, such as the widely used Price Sensitivity Meter (PSM), or a simple purchase intent study. The former is applicable to new-to-the-world products, and the latter may be good enough in competitively uncomplicated markets.
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