Dollars and Sense: Strategic pricing research That Works
We’ll be honest - figuring out what to charge for a new product or service can feel like trying to solve a Rubik’s Cube blindfolded. Price it too high and you may see a lack of customers. Price it too low and you could be leaving money on the table or making people question your quality.
So how do you determine the price-point that makes both you and your customers happy?
At Lab42, we have experience conducting optimal pricing research across various products, services, and industries. We use three methodologies to take the guesswork out of pricing - Van Westendorp Price Sensitivity, the Gabor-Granger Technique, and Conjoint Analysis.
Van Westendorp Price Sensitivity
This method aims to determine a reasonable price or acceptable range that consumers are willing to pay for a specific product or service. Respondents are exposed to a concept description and answer four questions:
At what price would you consider product X to be a good value?
At what price would you say product X is becoming expensive but still worth considering?
At what price would product X be too expensive for you to purchase?
At what price would product X be so inexpensive that you question its quality?
Clients can provide a list of predetermined price ranges (we suggest between 7-15 options) or allow open-ended responses for the 4 questions. We often use it in the early stages of product development, during product concept testing to identify the Optimal Price Point and the Range of Acceptable Prices for a specific product.
However, since this technique doesn’t take into consideration other dimensions that can impact pricing like competition or product features, we recommend using it directionally to gauge how low or high a price can go while remaining acceptable to consumers.
Gabor-Granger Technique
This method determines the optimal price point by determining consumers' willingness to buy a specific product/service at various price points. Prices are typically presented starting from a midpoint and change based on respondents' willingness to purchase at that specific price point (starting points can vary – can be randomized or go from high to low or low to high).
We recommend 5-7 price points to be included, which makes this approach a little longer, as respondents evaluate multiple prices.
The Gabor-Granger Technique is ideal for more developed concepts, when you have already narrowed your price points and want to understand how each specific price impacts demand.
Like the Van Westendorp method, Gabor-Granger doesn’t account for factors such as competition or features, so we also advise clients to use it directionally.
Conjoint Analysis
Unlike the direct questioning methods of Van Westendorp and Gabor-Granger, conjoint analysis is a trade-off technique that evaluates how different price levels, alongside product features or brand effects, influence consumer decisions.
Respondents are presented with various “products” that combine different prices and features and asked to select their preferred option.
For a straightforward and respondent-friendly conjoint analysis, we recommend using 4-5 attributes with 3-5 levels each, involving 12-16 tasks per respondent. This comprehensive approach goes beyond pricing alone to also account for features and potential competitive brands.
Conjoint analysis is useful when there is a more developed product or more refined concept, as it reveals what elements consumers are willing to sacrifice (in terms of features, brand etc.) at specific price points.
By using these methods, we can help you find the right price that works for both you and your customers. Whether you’re launching a new idea or refining an existing product, these techniques make pricing decisions easier while maximizing market appeal and profitability.
Ready to make pricing less of a headache? Or maybe you just have a question or two? We’d love to chat - schedule a time to meet using our Google Calendar (button below) or reach out directly by emailing the team at hello@lab42.com.
