As you've learned so far in Part 1, Part 2, and Part 3 of the Pricing Strategies and Brand Value Fundamentals series, setting prices is not easy. It takes a great deal of planning, analysis, and research to develop a pricing strategy that will effectively position your business to meet its goals. Bottom-line, you need to research consumers' willingness to pay as well as their emotions, perceptions, wants, needs, and more. Are you up to the challenge?
Naturally, pricing strategy is dependent on a variety of factors. You need to cover your costs and make a profit. You also need to make sure the price you set is appropriate given economic considerations and competitor offerings. The final piece of the puzzle is the human element. You need to get into the minds of consumers and determine what price they are willing to pay for your product.
A big part of that decision comes from their awareness of your brand, their experiences with your brand and others on the market, their understanding of your product's features and benefits, and their emotional connections to your brand and competitors' brands. Put all of that together and you've got the recipe for consumer perception. It's your job to dive into consumers' minds and learn what those perceptions are, how they affect consumers' purchase decisions, how you can massage those perceptions to match your goals, and how to set your prices.
The more you know about the way consumers perceive your brand and your competitors' brands, the less you'll have to rely on reactionary, short-term pricing promotions to reach your revenue goals. Instead, you can create the necessary messages and marketing campaigns to consistently and persistently build your brand promise so consumers trust it, depend on it, and become loyal to it.
With that in mind, market research related to pricing shouldn't be a one-time thing before a product launches. Ongoing monitoring of consumer perceptions is critical to ensure your price is always right, not just on launch day. It's also important conduct research prior to rolling out any discount promotions to ensure you're offering the best price discounts to drive an adequate return on your investment. For example, it might seem like a bundled pricing promotion might be a great way to increase per customer unit sales, but research might show you that such a promotion would drive very little interest.
Best case scenario, you can gather both quantitative and qualitative data to better understand consumer emotions, perceptions, and purchase decisions. A single survey or piece of data will never provide the full story and the depth of insight that you need to set prices as effectively as possible. By marrying quantitative data with qualitative insights, you'll have the complete picture in front of you.
Don't skip steps in the pricing research process or your ROI will go down. Take a lesson from Netflix, a company that learned the hard way that setting prices requires quantitative data and qualitative insights to ensure the right decisions are made. It might be tempting to raise prices in an effort to boost profits, but the negative backlash from consumers could do more harm than good in terms of negative publicity, lost business, and lost revenue. If you skip any part of the market research process, you're at risk of setting prices that will hurt sales rather than help sales.
If you missed previous parts of the Pricing Strategies and Brand Value Fundamentals series, you can follow the links below to read them now:
- Pricing Strategies and Brand Value Fundamentals – Part 1
- Pricing Strategies and Brand Value Fundamentals – Part 2
- Pricing Strategies and Brand Value Fundamentals - Part 3
Image: Billy Alexander, Jenny Cestnik