14.07.2020
"You don't gamble with food" - and neither should you do so with your own pricing policy.
Ist ein neues Produkt einmal mit einem bestimmten Preis am Markt, so kann man nur noch schwer daran drehen. Senkt man ihn, fühlen sich bereits gewonnene Kunden benachteiligt. Steigt der Preis, hat das eventuell einen faden Beigeschmack bei aktuellen oder potentiellen Kunden, die sich an den alten Preis bereits gewöhnt hatten. Wohl dem, der schon zur Markteinführung den richtigen Preis trifft. Wenn es da nur eine Möglichkeit gäbe, mit der man diesen optimalen Preispunkt ohne Trial-and-Error herausfinden könnte…
Once a new product appears on the market at a certain price, it is difficult to change it. If you lower it, customers who have already been won over will feel disadvantaged. If the price rises, this may leave a bad taste in the mouths of current or potential customers who have already become accustomed to the old price. It is good to be able to set the right price at the time of market launch. If only there were a way to find out this optimal price point without trial-and-error...
The BIFI team has developed the 'Nine Yards Price Detector' for this purpose, offering "the full package" of three particularly profitable research answers:
- What is the optimal price range?
- Which price is the purchase probability highest at?
- How does the purchase probability develop when the price changes?
Methodologically, there is the following problem: The question "What are you willing to pay?" can shed little light on actual future payment behavior - it is subject to too many biases: "What could I say now?" "If I name a small sum now, I'll soon get this super product for free!" "Well, currently I am not interested, therefore zero." However, all this information is not helpful.
That's why we take a different approach with the 'Nine Yards Price Detector'. Based on the Van Westendorpp model, we ask for price sensitivity in a step model and thus move significantly away from the popular value of "zero". This model allows us to show price curves and to incorporate corporate strategies into pricing policy and the choice of the final price.
The analysis of the responses provides information about the "optimal" and "indifferent" price of the product, as well as a threshold point of relative price worthiness and relative costliness:
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Optimal price (OPP)
At this point, the number of people who consider the product "too expensive" equals the number of people who consider the product "too cheap." This is where the greatest market penetration can be expected.
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Indifferent price (IDP)
At this point, the number of people who consider the product "expensive" is equal to the number of people who consider the product "cheap."
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Threshold point of relative price worthiness (MGP)
At this point, the number of people who consider the product "too cheap" is equal to the number of people who consider the product "expensive". This point should not be undercut in order not to damage the image of the product.
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Threshold point of relative cost (MDP)
At this point, the number of people who consider the product "too expensive" is equal to the number of people who consider the product "cheap". This point should not be undercut in order not to damage the image of the product.
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Ideal price range (MGP - MDP)
The ideal price range lies between the threshold point of relative price worthiness and the threshold point of relative expensive. If the price is outside this range, there is a risk that the price set too low or too high will damage the image of the product.
By querying the probability of use at different price points, a demand curve, which is dependent on the price of the product, can also be calculated.
- The demand curve describes the percentage of users who would buy the product at this price
- The indexed sales curve indicates what proportion of the maximum achievable sales can be expected at a given price.
Like all of BIFI's inhouse tools, the 'Nine Yards Price Detector' has been validated against representative studies and has been helping companies achieve often surprisingly high accepted price points since 2014.
Key Learnings:
The 'Nine Yards Price Detector' developed by BIFI is a scientifically designed tool for determining the optimal sales price, adapted to the needs of (especially digital) startups. The multi-stage process analyzes at which purchase price the necessary willingness and attractiveness for the purchase of a product exists among the target group while at the same time generating the highest possible profit. The goal is to maximize the probability of purchase.
And beyond that…
In addition, there are often strategic implications that arise from a study of monetization: Which payment models (e.g., subscription or bundle models) are considered plausible and customer-friendly by the customer?
In choosing the right mix of methods for such a study, we naturally proceed carefully and individually. Qualitative components often make sense in an initial phase, e.g., in the form of psychological in-depth interviews or focus groups, in order to better understand the sensitivities of the target group.
When it ultimately comes to the quantitative part of the study, you can rely on our weakness for sophisticated statistics!