Multifaceted Pricing Research – A Triangulation of Techniques
The Call
A major player in the durable goods category was developing a new, truly innovative product that launched their brand into a new-to-them category. As part of their Go to Market (GTM) planning, they wanted to make an informed decision about how to price this new product to ensure consumer adoption. In addition to being an innovative new product in a category they hadn’t played in before, they also anticipated launching it in retailers they had never sold in before. They were facing new territory on multiple fronts. They turned to Catapult to design and execute a study to inform their pricing strategy and ensure a successful launch.
Our Response
This project was truly unique and gave us a rare opportunity to evaluate pricing for the new product in 2 completely different approaches. However, that wasn’t the plan from the start. First, we utilized insights from extensive qualitative research to refine a range of prices to test in a quantitative setting using a Gabor-Granger (GG) price laddering exercise. To reduce as much bias as possible, we carefully developed a price range and randomly varied the starting price for each survey respondent.
During our GG analysis we observed the presence of anchoring bias which isn’t uncommon for pricing research but was stronger in this particular study than we had observed in the past. We hypothesized the anchoring bias was due to the product being unlike anything else on the market and consumers not having any real frame of reference for the price. This bias, some observed patterns in the data, and the known fact that GG tends to overestimate price sensitivity led us to suggest to our client that we evaluate the pricing in a second way. For the next survey, we employed efficient monadic testing design where each respondent was randomly shown one price point from a set of further refined prices in our testing range. However, monadic designs aren’t without drawbacks – while they are less susceptible to anchoring bias, they tend to underestimate price sensitivity.
The Celebration
Using the results from the Gabor-Granger and Monadic Price Testing we were able to create a data-backed recommended price range for the new product that varied based on the retailer in which it is sold. Our client appreciated the additional confidence they had from the 2-pronged approach to the pricing strategy, especially since they were entering a new category with new retailers. Their senior leadership team was aligned with the newly developed pricing strategy, and they are moving forward with the recommended prices for an anticipated 2025 product launch.