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What is Pricing Research
Market research is a business strategy to enhance a companies’ knowledge of the markets it operates in, new markets it wants to enter and future trends of existing markets. It aims to identify what people want, what they need, their beliefs and how they act. If market research is carried out properly it can help to establish a companies’ market share, provide a clearer medium and long-term strategy and a better relationship with its customers.
Customers are becoming ever more sensitive to the price of products and we have seen discount Voucher Codes sites like Voucher Finder or My Voucher Codes fast becoming some of the most frequently accessed properties on the internet. The research process begins with the creation of surveys and focus group discussions which are carried out on members of the corresponding target market. The results are gathered so that statistical methods can be used to analyse and interpret the information to draw an intelligent and rational conclusion. There are many components that a business can do market research on, but one of the most important and under-estimated areas is the research of prices.
Pricing research is a critical part of any companies’ strategy because it has immediate effects on profits, direct effects on customers and is the easiest medium to communicate and create appeal to prospective customers.
Why is pricing critical to strategy?
The prices of a businesses products and services determine the margins and profits the company is making. Some businesses price a product in relation to the amount it cost, which gives transparent profits. However, this does not take into account demand and therefore future cash flow cannot be accurately predicted. This is because price has a direct effect on demand and this can be predicted through a measure called the Price Elasticity of Demand (PED).
The price of a product affects the motivation of a consumer to purchase as well as their perception of that product. Market research has shown that a higher price will lead consumers to believe that the product in question is of a higher quality and the brand is perceived to have a better reputation. Furthermore, within edible products, studies have shown that users have a more pleasurable experience when consuming something of a higher price, compared to those that consumed the same item but bought it for much less. This is not rational, but instead is a result of consumers being conditioned by prices at a sub-conscious level.
Who is price research suitable for?
Pricing research is imperative to every company regardless of its stage in the business lifecycle. For start-up businesses and companies with new product lines, knowledge on pricing and consumer demand at various prices helps at the survival stage. They can anticipate demand and therefore profit more easily. This translates to a more manageable, predictable and positive cash flow, which is the primary objective of a new business. Pricing products correctly can help a growing business establish a market presence and share and helps mature businesses to maximise their profits.
There are a variety of methods of conducting pricing research, so it is important to choose the most suitable one.
