Do we need to lower or raise our prices? How much maneuvering space do we have? Setting the price can be the key decision.
Valicon uses three central solutions for price optimization, which reduces the risk of determining or changing the price on the market and help set the price, which will maximize the business objectives (increase of the market share or profit increase).
PSM (Price Sensitivity Meter)
This is a special technique, which calculates the price elasticity for a specific brand, product, service or specific integral part of the price. This gives us the basic consumer’s understanding of the price.
This is a technique which lets us determine the user’s understanding of the price with a survey. This technique gives us the following results:
- Price range;
- Optimum price;
- Price break scenario (share of users who are not prepared to pay a certain price anymore).
This technique is based on 4 simple indicators and specific accompanying questions. Separate questions need to be asked for each brand/products.
BPTO (Brand Price Tradeoff)
BPTO solutions simulates the purchase related decision making when the market prices for the target products change, as well as for competitive prices. The main elements the solution is based on are brand and price comparisons for specific products.
The result of this solution is:
- What is the acceptable price in regard to our business objective;
- How the share of consumer selection will change when the price changes;
- What is the price elasticity;
- How the price change affects the category consumption.
In general, this solution is used in the field of fast consumption products.
Often the question is how to determine which product qualities or services are the most important for an individual (consumer). The ideal product or service would therefore possess all the best qualities but in reality we have to give up a specific quality to replace it with a different one. Conjoint Analysis is a technique, which measures individual’s (consumer’s) preferences on specific characteristics or qualities of a product or service. The price is one of the product qualities.
In order to understand the Conjoint Analysis, the product/service needs to be described well, namely consistently with attributes and different levels in order to determine which quality can be replaced with something else. The attribute is a quality (external design, particularity, etc.) of the product or service – size, color, speed, and delivery. Each attribute represent a specific level – e.g. level red, green, etc. for the “color” attribute. Due to the complexity of the purchase decision making or deciding to use a specific service, the Conjoint Analysis is the technique, which helps us to best replicate the decision making process. This method allows us to measure individual’s (consumer’s) preferences for specific attributes and assess the value given to a specific attribute by the individuals (consumers).
The Conjoint Analysis is used when determining the optimum product/service composition. The solution is used in the service file d and in the consumer product fields (FMCG, durable goods, etc.).