Monday, December 6, 2010

How to Set the Right Price is Still a Research Question That Requires Know-How

DIY Marketeting research tools have dramatically reduced the cost of collecting data.  Instead of hiring a research firm for their specialized software - you can do it all yourself.  And that's fine for those simple basic research projects that provide feedback and basic ratings.  But there is one very specific, very specialized and very important marketing component that requires research and the specialized expertise that only a qualified, experienced and knowledgeable market research professional can really help -- PRICING.

Are You Leaving Money on the Table?

Most marketers and small business tend to ignore pricing as a powerful strategy.  They either do a basic cost-plus model or they simply follow along with whatever everyone else is doing.  This is a major mistake.

Pricing is, perhaps, the most powerful element of your marketing mix and done right, can add to your profitability with little more effort than the stroke of a pen.  OK- I lied.  Done right -- it would require a bit more than the stroke of a pen.  But this is where professional market research advice comes in.

1% Windfall is Every Market Researchers Pricing Bible

If you're in the market research business and are looking for an awesome niche to differentiate yourself -- grab a copy of Rafi Mohammend's book, 1% Windfall. Read it, processes it and develop a series of surveys around its chapters.

First of all - this should be a piece of cake for you because the the book literally outlines a series of potential pricing strategies and then gives you choices or categories or attributes -- whatever you'd like to call them, that define the attributes your customer would be after if you'd like to use this strategy. Let me show you what I mean - check out this section I pulled from my review of 1% Windfall.
Not enough new customers? More price points can actually attract more customers.  Try a “differential” pricing strategy.  One of the KILLER features of “1% Windfall” are these “voice of the customer” statements that Rafi has all through the book.  What I love about these is that you can literally pull them right out of the book at put them into a survey that you give your customers to see what they would prefer.  I pulled these from the “Pick a Plan” Chapter.  Do any of these statements sound like something your customers might say?

  • I am willing to fill out forms, mail them, and wait several weeks to get a lower price.”

  • “Will you match the discount price that is offered by a rival?”

  • “I am willing to trade convenience for a discount.”

  • “I’d like a break if I purchase two or more products.”

The entire book is filled with these!  The only sad thing about this is the realization that most small businesses are unfamiliar with this kind of research.  They are afraid to mess with pricing and when they do, it's often without good data.

Mohammed has done his part in writing a book that is easier to use to set pricing and market researchers who are familiar with pricing research could really help small business by helping them create surveys and feedback tools to gather this information.

What's been your experience with pricing research?
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