Let’s put the right price on your product!

by Julie Verledens on June 17th, 2016



Pricing is one of the crucial elements in a marketing plan, because let’s be honest: at the end every company needs profit to be able to keep on running. But pricing also has to be one of the most difficult steps in the marketing plan. Several parameters must be kept in mind:

–          What are your financial goals (profitability)?

–          Consistency with other products in the market?

–          What do the target customers want to pay for your product?

Profacts understands how crucial the right price is and has several tools to help you to defining this number.


There are several techniques than can be used to define prices (e.g. Gabor-Granger, Choice-Based Conjoint, Brand Price Trade Off, Price Sensitivity Meter, priced purchase intent, implicit measures…). We can offer you all of them, but we believe that with the following 3 methods, all your questions can be answered:

         1.      Implicit measures
         2.      Price Sensitivity Meter (PSM)
         3.      Choice-Based Conjoint (CBC)

Below we will explain you how each technique works and when each of them should be used.


1.     Implicit measures

Ever since Profacts was founded in 2006, we’ve tried to combine strategic and academic knowledge in our market research. We believe that this combination allows us to go further than just data delivery, but we want to be able to give our clients clear and actionable recommendations at the end of each project.

As you might have heard already, Profacts (in collaboration with Ghent University) translated techniques coming from cognitive psychology into tools that can be used in market research to search for non-strategic, non-social-desirable answers.

Especially in the context of pricing, ruling out strategic answers is very important! Therefore a technique was developed to define the price that is considered to be fair based on the consumers gut feeling.

The big advantage of this technique, compared to general methods to measure implicit responses, is that no participants need to be put in scanners, nor sensors need to be put on hands, heads or other bodily parts. On the contrary, the test can be implemented in an online survey, which makes it much easier (read: faster and cheaper) to collect implicit responses on large amounts of people. Participants are asked to evaluate prices at a high pace. Forcing people to answer fast makes sure that strategic answers are not possible, so the participant’s gut feeling takes over.

This technique gives us the output that can be seen below. We are searching for the price at which the acceptability suddenly drops. For every product and service we’ve tested so far (and there’s a lot of them) the fair price that comes out of this research is higher than the price found in a PSM.

So this method shows you what the ultimate price is that is accepted by the (potential) customer. Still this result is only a part of the answer. Combining this result with a PSM gives us a broader view on the right price.





2.     Price Sensitivity Measurement (PSM)

The PSM, designed by Van Westendorp in 1976, must be one of the most frequently used pricing techniques in market research. By asking only 4 questions the acceptable price range is defined:

  • At what price would you consider the product to be so expensive that you would not consider buying it? (Too expensive)
  • At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good? (Too cheap)
  • At what price would you consider the product starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it? (Expensive)
  • At what price would you consider the product to be a bargain, a great buy for the money? (Cheap)

Cumulating the results for the several prices and crossing the 4 lines gives us a range of prices. The price at which the “too cheap” line and the “too expensive” line cross is considered to be the perfect price.

Although the implicit measures show us the highest acceptable price, it does not show what’s the impact on purchase behavior from lowering or increasing the price. For this additional information we suggest to combine the implicit measures with the PSM technique. The output of the PSM shows u how many (potential) customers would buy the product at each price level.



3.     Choice-Based Conjoint (CBC)

Both the PSM-technique and the implicit measures only test one product at a time, so in both methods the competitive setting is not explicitly taken into account.

Also if you want to know what’s the effect of a specific characteristic (e.g. size of package, brand…) on the price people are willing to pay for your product or service, previous methods cannot give you the complete answer.

To deal with these specific research questions a choice-based conjoint is the right technique to choose. An example of how this exercise looks like can be found below. On every screen participants are asked to choose between a range of products. Each of these products is a combination of several characteristics. Every screen in the test shows a different range of products.

At the end of the project we can tell you which attributes have the largest impact on the purchase intent and what’s the value of each of the product attributes.

One of the advantages of this method is that, because of testing a real-life competitive setting, the market shares of each product can be simulated. The effects of adding, adjusting or deleting a product, both from your brand and the competitors, can be tested and the effects on market shares can be seen.



When using the right technique we can tell you what’s the optimal price for your product or service. Of course the consumer’s opinion is only 1 element that needs to be kept in mind when defining a price. Crossing the consumer’s product value with the revenue that can be generated at each price is a calculation that definitely needs to be done and it can alter the conclusion about the right price.

Since price is an important factor for success, Profacts is your ideal partner to shed some light on the matter.



Leave a Reply

Note: XHTML is allowed. Your email address will never be published.

Subscribe to this comment feed via RSS