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MEASUREMENT
Lesson 15
Pricing for Value
Elkana Ezekiel
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PLANNING A RESEARCH STUDY
What are the key steps a Brand Manager would follow?
What is the problem
Research objectives
Defined by the business problem
define variables
Type of study?
EXPERT OPINION
https://www.youtube.com/watch?v=ofW2lJVoHUY
TYPES OF MEASUREMENT PROCEDURES
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TYPES OF MEASUREMENT PROCEDURES
Conditions of measurement Dependent variable is either actual
purchases or self stated purchase
UNCONTROLLED: preferences & intentions
• Direct questioning
• Simulated purchase
Preferences & • Buy-response survey experiments
intentions • In-depth interviews
• Trade-off (conjoint)
analysis
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IN-STORE PRICING EXPERIMENT
STORE 1 STORE 2 STORE 1 STORE 2
BASE WEEKLY 100 100
SALES UNITS
AVERAGE PRICE PER 2.00 1.85
UNIT
NEW PRICE PER 1.80 1.85
UNIT
WEEK 1 108 101
WEEK 2 106 100
WEEK 3 112 108
- Any conclusions?
- Any questions that come to mind?
ANALYSING SALES HISTORY
YEAR SALES IN USD GROWTH % SALES IN GROWTH %
VOLUME
2015 100 100
2016 114 14% 104 4%
2017 131 15% 119.5 15%
2018 146 11.5% 136 13.8%
2019 158 8.2% 150 10%
2020 EST 155 (2%) 147 (2%)
2021 ?? ??
- What are some possible explanations for the trends in sales revenue and sales volume?
- How reliable will the 2020 Estimate prove to be?
- Can we use some of these trends to forecast for 2021?
TYPES OF UNCONTROLLED STUDIES OF
ACTUAL PURCHASES …1
HISTORICAL SALES DATA
◦ Cheap and easily available
◦ Normally allows estimation of price elasticity of the next level in the channel
◦ Aggregating retail sales data over long periods could mask price variations
reducing accuracy of estimations
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TYPES OF UNCONTROLLED STUDIES OF
ACTUAL PURCHASES …2
CHALLENGES
◦ Price may not be the only variable
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TYPES OF UNCONTROLLED STUDIES OF
ACTUAL PURCHASES …3
PANEL DATA
◦ Panel of households with actual purchase data recorded daily
◦ Actual purchase prices recorded (including use of coupons)
◦ Correlation of price sensitivity possible with demographic
segments
◦ Sales and prices of competing products obtained
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TYPES OF UNCONTROLLED STUDIES OF
ACTUAL PURCHASES …4
ISSUES WITH PANELS
◦ Representativeness
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- 81,200 households – (66,100 homes in Urban and 15,100 homes in
Rural)
- Paper Diary
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What We Do | Detailed Methodology – How do we collect data?
At the end of each month, the data from Once the data is collected, it goes through
the previous month is released & made regular checks & then processed by our
available to clients specialized team of data analytics
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What We Do | What consumer measures can we report?
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TYPES OF UNCONTROLLED STUDIES OF
ACTUAL PURCHASES …5
STORE SCANNER DATA
◦ Can be combined with panel data to get strong insights into shopping
behavior & price-sensitivity
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TYPES OF UNCONTROLLED STUDIES OF
ACTUAL PURCHASES …6
Difficult in B2B markets as the number of transactions is fewer
and data availability is an issue
◦ But firms can create their own internal database
e.g. a record of tender bids with outcomes and estimated
competitive prices. Could then develop a model of price
sensitivity
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EXPERIMENTALLY CONTROLLED STUDIES OF ACTUAL
PURCHASES
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TECHNOLOGY IN RETAIL
RESEARCH
https://www.youtube.com/watch?v=7_WguRgyn74
EXPERIMENTALLY CONTROLLED STUDIES OF ACTUAL
PURCHASES
Major benefit of in-store experimentation is the ability to test for interactions
between price & various marketing variables
◦ But this is costly as each additional factor will need more stores added
High cost of monitoring, analysis of sales data & securing retailer cooperation is
the biggest issue with in-store experiments
Other negatives
◦ Loss of consumer goodwill – feeling manipulated, may actually switch brands
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LABORATORY PURCHASE EXPERIMENTS
Duplicate realism of in-store experimentation without the high cost
or risk of exposure to competitors
◦ These tests can control all variables – consumer profile, product
price levels, shelf-location, displays
◦ Allows for inferences from far fewer purchases in much less time
compared to in-store tests
Research facilities can range from the simple to very sophisticated
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LABORATORY PURCHASE EXPERIMENTS
Simple set-ups are quick and cheap
◦ Consumer's behavior could be impacted
- pay more attention to prices, more attentive when selecting brands,
self-conscious i.e. perception of being too thrifty
Highly sophisticated research facilities overcome these issues
◦ Create a simulated store almost mimics a typical convenience store
◦ Consumers may watch TV programs with ads, or read magazines before
starting shopping
Now internet testing is very convenient, fast and cheap
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UNCONTROLLED STUDIES OF PREFERENCES &
INTENTIONS
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UNCONTROLLED STUDIES OF PREFERENCES &
INTENTIONS
DIRECT QUESTIONING Buy-Response surveys
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UNCONTROLLED STUDIES OF PREFERENCES
& INTENTIONS
ATTRIBUTE RATING IN-DEPTH INTERVIEWS
◦ Price is among many variables rated ◦ Help understand which product features & benefits are
important – Allows for exploration in-depth
◦ In real life, Consumers do not evaluate
products in such fine detail ◦ Understanding the monetary & psychological benefits of
using the product/service
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EXPERIMENTALLY CONTROLLED STUDIES OF
PREFERENCES & INTENTIONS
SIMULATED PURCHASE EXPERIMENTS ADVANTAGES
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CONJOINT ANALYSIS
https://www.youtube.com/watch?v=Su2qIrTmv1c
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CONJOINT ANALYSIS
Closer to real-life choices as it gets respondents to evaluate a product in its
entirety vs. more abstract individual attributes
◦ Example - When MBA graduates were asked about individual job attributes, #1 -
people & company culture, but when asked to choose while given various job
descriptions, salary, region & location came higher
◦ Use this to describe the combination of attributes that most profitably skim or
penetrate a market
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THE IMPORTANCE OF MANAGERIAL JUDGEMENT
Understanding price sensitivity comes later – First get a broader & deeper
understanding of consumers as real people
Integrating soft managerial judgement about buyers & purchase behavior with
numerical estimates is critical to successful pricing
◦ price sensitivity measurements are precise because they exclude all factors that
are not conveniently measurable
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THE IMPORTANCE OF MANAGERIAL
JUDGEMENT
Managers can improve price sensitivity estimates by using their knowledge of
their buyers to
◦ e.g. if 80% buyers are working women, then recruitment has to happen in the
right locations and at the right time
◦ shifting dates of Diwali every year that impact product sales in different
months
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THE IMPORTANCE OF MANAGERIAL
JUDGEMENT
Managers can improve price sensitivity estimates by using their knowledge of
their buyers to
1. Provide information to sort out the effects of price from other variables that
tend to change with it
◦ e.g. using knowledge of the purchase cycle & inventory holding to decide
length of experiment
◦ e.g. using the word “knob” on a radio vs. “control”; time for 0-60kmph is not
important to describe a family car
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Thank You
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