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Please read the following product description for a new product: [ENTER PRODUCT DESCRIPTION]. Based on the description, how interested would you be to buy this new [PRODUCT/SERVICE] if priced within your budget? 2. What do you like about the described [PRODUCT/SERVICE]? 3. What do you dislike about the described [PRODUCT/SERVICE]? 4. What would you expect to pay for a new [PRODUCT/SERVICE] like the one described? [SPECIFY QUANTITY OR UNITS SO RESPONDENTS CAN ESTIMATE APPROPRIATE RESPONSE] 5. At what price would this new product begin to look inexpensive or cheap? 6. At what price would the product begin to look expensive? 7. At what price would the product be too expensive - so expensive that you would never consider buying it? 8. At what price would the product look too cheap - so cheap that you would feel that quality could not be good? 9. About how many units of this new product would you buy over the next year at each price/units price listed? 10. If you knew that the average price of [PRODUCT/SERVICE CATEGORY] was [PRICE], would you expect to pay more or less to buy the described product/service? 11. If you knew that average price of [PRODUCT/SERVICE CATEGORY] was [PRICE], would you expect to pay more or less to buy it from [COMPETITOR] if they offered it?

Launching a new product? How will you price it? How do you know the absolutely perfect price -the price that will maximize your income, right from the outset? http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073899859 Survey Monkey

Pricing surveys and value research are always of great interest to managers faced with determining the merits of increasing profit margins by raising prices, or the likelihood of increasing revenues by decreasing prices. Online pricing studies can be conducted using a variety of methodological approaches, including conjoint analysis, Van Westendorp models and price rating scales.

PRICE RATING SCALES


Rating scales often are used to provide graded scales that indicate importance or acceptability of a given concept. Their application within online pricing surveys usually involves determining (1) the degree of importance that consumers attach to a given price level. This approach reports the overall importance of price and not the optimal price for a given product or brand. Price importance, along with measures of other attribute importance constructs, is useful in segmenting respondents into key market segment groups. Pricing questions or pricing scales can alternatively include such measures as (2) the likelihood of trial, (3) the likelihood of purchase at given price points, or (4) the overall acceptability of a series of price points can be measured. These pricing measures would be repeated for multiple price points, thereby allowing the researcher to pinpoint the optimal price for a given product. Multiple price points or pricing questions must be used.

DIRECT PRICING MEASURES


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Many different ways to include premium measures into the pricing scale exist and can be implemented for specific pricing studies.

VAN WESTENDORP PRICING MODEL


The Van Westendorp method uses a series of questions to identify key psychological price points given the respondents introduction to a product description. Respondents are asked to report

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The price at which the product is so cheap that the respondent would question its quality.

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The price at which the product is inexpensive, but not so inexpensive that the respondent would question its quality.

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The price at which the product is expensive, but not so expensive that the respondent would consider it.

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The price at which the product is so expensive that the respondent would not consider it.

The price measurements in each of the respective categories provide a distribution of perceptions about the acceptable price of the product. The analysis of these distributions will help answer such questions as what is the average expected price; at what price would we expect purchase intention to drop sharply; and at what point is the price too inexpensive to imbue a quality image? Economists express these concepts in terms of price elasticity of demand. The key to an effective Van Westendorp study is to create a price scale so that lower is not always better and so that users of a product are differentiated form non-users of the product. Furthermore, the price value of the product must be measured so that an accurate view of price perceptions and propensity to buy are included.

Respondents often report preference for an expensive product over a cheaper alternative, but this may not hold true in an actual purchase situation. Validation measures for pricing questionnaires are always essential.

EXPERIMENTAL TEST MARKETS


Online pricing experiments provide an interesting approach to comparing price changes and their effects in real world situations. Different market segments may be chosen to receive different product, pricing, or purchase situation information. For example, prices may vary by distribution location (i.e., convenience store, grocery store, and mega store), and the likelihood of product purchase in each of these store types can be compared. The use of graphics in the form of pictures of the store and product provide a window to the world that assures more realistic and accurate price elasticity estimates.

ECONOMETRIC MODELS
Tracking the effects of pricing on market share over an extended period of time gives a unique view of price demand relationships. Monthly or quarterly measures show changes that result from marketing programs, competitive action, or general market demand. These trend analysis studies estimate price-demand relationships and can show the interaction between price and brand sales if market measures of price changes are included. By way of contrast, the Van Westendorp

method, conjoint analysis, and discrete choice conjoint analysis may be modeled to include the influence of broader price ranges on the brand and can be accomplished in much shorter time periods.

FULL PROFILE CONJOINT ANALYSIS


Traditional full profile conjoint analysis uses ratings or rankings of distinct product profiles as the means to estimate pricing effects. For example, a conjoint analysis product profile might be composed of five attributes. Using express mail services as an example, each service is composed of a set of attributes like company name, delivery options, price and dropoff location options. For each attribute, there are levels that can be identified. For example, the company name might include FedEx, UPS, DHL, USPS. Price might include $3.95, $7.95, $11.95. Delivery options might include next morning, next day, two day, or five day.

The conjoint analysis profiles present different combinations representing express mail services. Respondents view these combinations and state their preference. The design of conjoint analysis combinations is non-trivial and must be done using experimental design methodology. The conjoint analysis processes a set of utility functions for each respondent measured, for segments within the sample, and for the total sample. Utility functions show the demand curve or relative importance of each attribute and each level of each attribute.

Conjoint analysis simulations are used to analyze the sensitivity of each of the attributes to changes in the market place. Conjoint simulations of the actual market place can be run to estimate the choice share (market share) that would be derived from changing the feature level combinations that make up the product. Conjoint simulations typically assume that consumer utilities are linear and additive and may not represent real world.

SELF-EXPLICATED CONJOINT ANALYSIS


The self-explicated conjoint model provides a simple alternative for producing utility score estimates equal to or superior to that of full-profile and other popular approaches such as Adaptive Conjoint Analysis. The self-explicated model is based theoretically on the multi-attribute attitude models that combine attribute importance with attribute desirability to estimate overall preference. Initially, all attribute levels are presented to respondents for evaluation in order to eliminate any levels that would not be acceptable in a product under any conditions. Next, attribute levels are presented and each level is evaluated for desirability. Finally, based on these evaluations, the most desirable levels of all attributes are evaluated for relative importance. As with the full-profile model, these scores can be summed and simulations run to obtain a score for any profile of interest. This simple self-reporting approach is easier for the respondent to complete and straightforward in terms of determining the importance or desirability of attributes and attribute levels (See Srinivasan, V. (1997, May). Surprising robustness of the self-explicated approach to customer preference structure measurement. Journal of Marketing Research, 34, 286-291.)

DISCRETE-CHOICE CONJOINT MODELS


Discrete-choice modeling is used to determine the influence that both price and product features have on brand value. In discrete-choice conjoint studies, the respondents are shown different full profile sets. They then choose the one that they most prefer. This choice task is much easier and often more realistic than the rating or ranking tasks used in the other conjoint analysis models.

When customers shop for products such as clothing or a dishwasher, a brand is often associated with a set of attributes, such as its price, style, color, fit, and type of material. Each individual respondent is faced with a choice of two to five product configurations, and then chooses one of the configurations. These choices reflect the value or utility he/she assigns to each attribute. These choices are later analyzed to produce the utility functions that derive differences in the attribute values from the competing alternatives and/or differences in the characteristics.

Discrete-choice conjoint analysis using d-optimal designs offers some advantages over a ratings based conjoint analysis. Discrete-choice conjoint presents optimal sets of choices within a group of products. Discrete-choice conjoint analysis provides estimates of the demand curves for all attributes and brands included in the study. Also incorporated is the ability to estimate feature level interactions, including the brand-price interaction. Like all conjoint analysis simulations, discretechoice conjoint analysis simulations can be used to place product choices into a competitive market situation.

In what ways do you determine product price when you are about to launch your new product? Examples: Matching competition? Less than competition? More than competition?

Making a price based on calculating a plan to recover your own costs?

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The bulk of price determination comes from marketing and finding answers to pertinent questions: Competition: prices? features? incentives? Market: demographics? complementary products? supplementary products? available funds? network effects? HOWEVER, I believe you need to take strategy into account. If marketing is the map, strategy is where you are going.

You may try the first-to-market, lowest-cost-provider, sit-and-wait (or second-to-market), premier provider, joint-partnership, or any of several strategies. All will affect your final price, and things will change after you have launched so you will need to update your price frequently. SIDE-NOTE:

I can say that you should not price a product based on recovering your costs. I think you are more likely to overprice or under-price if you follow that tactic because you are focused on yourself rather than the value perceptions of your potential customers. You should use the technique of determining cost recovery to see if you should bother with selling your product. If you determine a price for your product that requires you to sell an unrealistically huge number of units a year to recover your costs, then you should probably scrap the idea as a product. Keep it as an idea, or a side project if you like. Who knows? The market may change and support your idea as a product, but until then you are better off throwing your time and money at something else that will provide a better return than just putting your money in a bank.

3 - How should I price it? Pricing is an important consideration. When you do your competitive analysis you'll learn how similar products or services are priced. You want your price to be attractive enough to sway people to buy; unless you're pricing a luxury product and the higher the price, the higher the perceived value. The option for prospects to keep their money and not buy from anyone is always one of your competitors. I find it's better to start on the low side to make sure the perceived value is greater than the cost. You can raise the price once demand has been established. 4 -How much revenue can I expect to generate within a specified time period (usually one year) This is an important question and is dependent upon the actions you take to generate sales. You'll need to think through your Marketing Plan in order to come up with a realistic projection of how many widgets you can sell at $XX within a specified time period. Analyze your sales history to help you know what has worked in the past. If you have a long lead time for sales, that should be taken into consideration. This may mean hefty upfront expenses with corresponding delayed revenue income. To be conservative make your revenue projections and then knock off 30%. 5 - What will it take to realize this additional revenue and profit?

What additional resources will you need when launching a new product or service? Do you need to hire more people, buy more supplies or inventory, etc.? That additional cost must be taken into the equation. These may be in the form of fixed or variable costs. Consider what the competition is doing and what market insights and trends you can utilize that will generate sales. Select one or two actions for your initial campaign and test on a small scale before committing major dollars. At best, making a financial revenue and expense projection is always a guesstimate. Gathering and analyzing pertinent information is the key to accuracy. 6 - Where is the break even point and what is the potential profit? The formula to determine how many you have to sell to start making a profit is Fixed Costs divided by (Revenue per unit minus Variable costs per unit). A quick and simple explanation of this can be viewed in the article, "Breakeven Analysis" . For some products or services the upfront investment is such that the breakeven doesn't happen for more than a year. If that is your situation, you'll definitely want to know how you're going to capitalize such a project.

http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html

Pricing and price strategy The Secret of Optimal Pricing Strategy Understanding buyer behaviour ,whether its in a B2B market, or a B2C market, is a key factor in pricing for success. Price and pricing strategy is interwoven tightly with all other elements of the marketing mix... change the product and you need to review the price (makes sense?)... change the distribution, you'll also need to modify price, change the advertising mean reviewing price, so does changing processes, changing the people who support the product, changing the positioning... all demand price re-development. Pricing strategy is about real marketing, real-time: Most importantly price is the least scientifically and most potently powerful sales tool in the marketing mix. Understanding Pricing Metrics can make profits soar! Using data-mining techniques, you can discover the right price to sell at, the right price to discount at, the right price to wholesale at, offer RRP for, and re-positioning to, to significantly improve profits with damaging sales. Ask for price optimisation research now for maximum profits. Value Based Pricing

Value-based pricing uses buyers perceptions of value, not the sellers cost, as the key to pricing. The organisation uses non-price variables in the marketing mix to build up perceived value in the buyers minds. Price is set to match the perceived value. How you can improve price strategy

FMCG? Use advanced data mining & analysis techniques to identify the optimal discount price point for 'case deal' promotion at retail. Juggling Multiple segments? Use scientific product classification analysis to determine the optimal pricing strategy according to buyer behavioural constants observed in specific product category types. Need market share growth in a Competitive Industry? Use life cycle analysis to select the best pricing policy for satisfying anticipated customer trends and winning market approval and market share growth. Need more profits? Use sophisticated product analysis, market analysis, competitor analysis and product portfolio management methods to forecast future sales with accuracy, generating better production and inventory control.

Economic Value Pricing Strategy For many industrial products, the costs perceived by customers extend well beyond the price charged. An industrial purchaser perceives the cost of equipment as including installation, maintenance, training and use of consumables, as well as the basic purchase price. Equipment purchases are evaluated over their economic lives and comparisons between competitors go beyond straight price assessment. Going-rate pricing strategy The company bases its price largely on competitors prices, with less attention paid to its own costs or demand.

The company might charge the same, more or less than its major competitors. In oligopolistic industries that sell a commodity such as steel, paper or fertiliser, companies normally charge the same price. The smaller firms follow the leader: they change their prices when the market leaders prices change, rather than when their own demand or cost changes. New Product Pricing Strategies

The price of a product changes along with its life cycle. The introductory stage is the most challenging stage for new products. Companies may use marketing-skimming pricing when they introduce innovative new products. Such companies set a high price in order to maximise their profit quickly. Marketing-skimming pricing: Setting a high price for a new product to skim maximum revenue from the segments willing to pay the high price; the company make fewer but more profitable sales. Marketing-penetration pricing: Alternatively, companies may initially set a low initial price for their innovative new products when they enter the market. The lower price can help the company attract more customers and may lead a group of customers to switch from the competitors. Marketing-penetration pricing enables the company to achieve the leader position in the market. Reasons to engage a pricing strategy marketing consultant

Get pricing right to deliver higher profits. Make core pricing decisions with quiet confidence. Effective pricing strategies and tactical pricing initiatives to a expand margins and generate earnings growth Pricing Market Research Consultants that segment a market and work hand-in-hand with clients to enhance product pricing strategy and price optimization.