Deciding on a price for your new products or services can be tricky.
Consumer expectations are constantly changing on the demand side.
Logistics and internal resources largely determine what is possible on the supply side.
So how do you make an informed decision on pricing?
Enter pricing sensitivity surveys. This type of market research offers you and your organization a reliable, accurate way to land on a price tag that works for customers, you, and your bottom line.
This blog post covers what a pricing sensitivity survey entails as well as a case study of one we conducted with a client.
Are you still at the product development stage? Read about why market research may be necessary for your organization here.
What is a Pricing Sensitivity Survey?
A pricing sensitivity survey is a quantitative market research approach used to identify and optimize pricing for a product or service.
The ultimate goal is to find the best balance between a fair price and significant interest from potential customers.
Based on fundamental economics, pricing sensitivity surveys are designed assuming a higher price will appeal to fewer potential customers.
Likewise, a lower price will appeal to more potential customers. Using a series of calculations, this type of survey can often provide a business with direction on what price level will return the highest expected revenue.
A well-constructed pricing sensitivity survey will provide a business with the overall appeal of or willingness to buy the product or service at various price points.
Objectives of a Pricing Sensitivity Survey
A full-service insights and strategy firm in Minneapolis, MN partnered with Drive Research to conduct a market research study for a medical technology company in the UK.
The goal of the market research project was to assess the pricing levels and structures of a new care management platform to inform the value it could demand in the marketplace.
The data and findings from the market research provided the client with direction on which pricing levels and structures may be the best fit for its strategy moving forward.
Approach to the Pricing Sensitivity Survey
To address the objectives for the insights and strategy firm and the medical technology client, Drive Research recommended the following market research approach.
This included a quantitative online survey among potential users within the U.S. geography.
Details of the Pricing Sensitivity Survey
- Respondents were a mix of orthopedic surgeons and non-clinical decision-makers in a medical setting.
- The survey was blinded to the non-customers of the brand. Which meant respondents did not know it was sponsored by the medical technology company when starting the survey.
- The online survey took an average of 15 minutes to complete and included 53 questions.
- The survey received 150 responses.
- Fieldwork for the survey began on February 24 and lasted until March 15, 2021.
Analysis of the Pricing Sensitivity Survey
Our global market research company also utilized pricing analysis techniques for the medical technology client.
Using a laddering approach, our data analysis for the survey examined how reasonable each tested pricing level was to respondents.
An important component of the survey design was having all respondents evaluate the same standard offering.
Keeping the description and features constant for the tested patient management platform ensured pricing was the only variable that was changing.
Here’s how it worked:
- Each respondent assessed how reasonable the base price level was for the platform. This figure represented the target pricing for the client’s platform.
- If the respondents deemed the first price level reasonable, they then evaluated a slightly higher price level to see if the cost was still reasonable or if they’ve reached their breaking point.
- If the respondents found the first price level to be unreasonable, they were shown a follow-up price level that was slightly lower. The idea here was to see if respondents would find a lower price level more reasonable or if there was still a gap in their expectations.
- On the backend during the analysis, our market research firm was able to calculate how many total respondents found the platform pricing reasonable at each of the three levels. This type of analysis typically reveals at which price point you can optimize revenue.
Let’s say we have the following simple data as an example:
- 20 total respondents find the $500 price level reasonable
- 100 total respondents find the $300 price level reasonable
- 200 total respondents find the $100 price level reasonable
Calculating out the potential revenue at each pricing level, we get the following:
- $10,000 at the $500 price level
- $30,000 at the $300 price level
- $20,000 at the $100 price level
From these calculations, we see that the $300 price level may have the most potential of the three tested price levels.
This doesn’t necessarily mean the $300 price tag is your end-all and be-all, but it offers valuable direction for pricing your product or service.
Outcomes of the Pricing Sensitivity Survey
The detailed findings from the survey outlined in a market research report remain confidential with the insights and strategy firm and the medical technology client.
The market research answered the following research objectives:
- What solutions are currently being used for patient care management?
- How appealing is the new patient care management concept?
- What features will provide value for providers?
- What price points are acceptable for potential customers?
- What is the decision-making process for patient care management solutions?
The comprehensive research report included a background and methodology, an executive summary of findings, recommendations, and an appendix.
The appendix featured a detailed question-by-question breakdown of the survey and a final copy of the survey document.
Additional deliverables of the pricing sensitivity survey included:
- An Excel cross-tabulation banner file breaking the data down into key segments
- A full data file showing all responses
Drive Research is a national market research company serving all industries and organization types. Our team of experts has extensive experience in various pricing studies and methodologies based on a client’s needs.
Interested in learning in receiving a proposal or quote for a pricing study? Contact our team today!
- Message us on our website
- Email us at [email protected]
- Call us at 888-725-DATA
- Text us at 315-303-2040
As a Research Analyst, Tim is involved in every stage of a market research project for our clients. He first developed an interest in market research while studying at Binghamton University based on its marriage of business, statistics, and psychology.
Learn more about Tim, here.