August 1, 2013
You’re ready to go to market, but you’re not sure precisely how much your offering should cost, or how consumers will react when faced with a real world decision between your product or service and that of a competitor. That’s where Kelton can help.
Kelton’s modeling techniques allow you to establish high, low, and medium price points, and how those affect a broad array of different consumers. In essence, you’ll be able to determine whether undercutting your competition is the most successful strategy, or whether your service is seen as a value-add that commands a higher price, and would be diminished by a lower price point.
Kelton can then help you simulate the real world decisions that consumers make in stores when choosing a product or service – and most importantly, understand those decisions. This allows you to course correct on packaging, messaging, and content to match the true needs of your audience.
Pricing Models: Finding Consumers’ Price Sensitivity Sweet Spot
Research frameworks should mirror the real world decisions consumers make – especially in developing pricing models. It isn’t enough to ask for thumbs up, thumbs down gauges on particular price points, or to ask consumers to apply dollar figures to products. Kelton’s Price Modeling Methodology cuts through the complexity of pricing decisions by helping you:
- Understand consumers’ value associations across various price points
- Create a competitive benchmark for price assessment (how the broad competitive set is priced)
- Factor in broader economic issues
- Accurately assess the trade-off between price and quality
- Adjust for changing consumer beliefs and attitudes
- Test advertising’s impact on price sensitivity
- Getting to the Heart of Real World Behaviors. While all consumers state they want the lowest possible price, research shows this is not actually true – there’s an implicit trade-off between price and quality that’s captured in Kelton’s Price Modeling Methodology. We utilize the Van Westerdorp theory of price modeling to extract price points that are tied to value associations – and in doing so, most closely replicate a consumer’s decision at the moment of purchase.
Consumer Choice Modeling: Gauging Consumer Price and Product Feature Elasticity
Consumers face an ever-growing number of choices when making purchase decisions. Which brand? What size? Which features? What price? Given the myriad options your average consumer is confronted with, it’s no easy process to model these relative factors across a multitude of brands. Trying to discern a quantifiable pattern of purchasing behavior can quickly resemble the deconstruction of the most complicated of socio-economic puzzles. But Kelton’s considerable research and development efforts in this area have given us the confidence and skills to design an effective, engaging survey instrument that mimics real-world shopping behavior.
At Kelton, we utilize a number of Choice Modeling techniques that are dependent upon a client’s specific needs and functional objectives. Discrete Choice Modeling, Conjoint, Maximum Difference Scaling, and Chip Allocation provide our clients with effective tools to understand their products’ maximum ROI across different and distinct product feature configurations, like package size and mobile device interface offerings.
Kelton’s Choice Modeling process ensures a research model that replicates the real-world shopping experience in all its minute detail. By providing respondents with a range of brands, product features, price points, and even an “I don’t like any of these offerings” choice, we are able to recreate the decisions landscape with which consumers are most often confronted.
Our real world based Choice Modeling tools provide you with:
- Feature versus Price Trade-Off Decisions. Maintaining a happy balance between overall profit margin and share of market is the universal aspiration of any successful brand. But this delicate calculation is further complicated by the addition of several layers of market factors: an inexhaustible variety of feature options; the periodic fluctuation of raw material costs; and the unpredictability of the economy as a whole. To account for these variables, Kelton provides its clients not only with clear, concise, and data-supported recommendations for immediate implementation, but also with a user-friendly market simulation tool. This allows our clients to examine virtually limitless combinations of market variables, like brand mix, price sensitivity, and a whole range of different product features. With the Kelton market simulation tool in hand, clients have the power to test the competitive market prior to making complex product and brand decisions.
- Product Take-Rate Analysis. In addition to helping our clients optimize their product and brand offerings, we complement our Feature/ Price Trade-Off Analysis with a Product Take-Rate Analysis. This is designed to provide our clients with even further cost-structure analysis (when are customers likely to purchase their different products…and at what price?) before they go to market, or during the core offerings refinement process.
Line Extension Analysis: Optimizing Product Lines and Shelf-Space
Your goals are simple – to put forward the product lineup or shelf set that will resonate with the broadest possible cross-section of your target audience. Optimized to work across a variety of industries and provide accuracy for products, services, and ad campaigns, Kelton’s Line Extension Analysis methodology utilizes an algorithm that takes both relative importance and cannibalization into account – giving you a real world understanding of the incremental value of individual products when viewed as part of a complete product set.
The Kelton Line Extension Analysis is led by a team of statistical experts with years of CPG, Advertising, and Messaging experience; we also bring the marketing backgrounds that help you understand the real-world implications of the research.
- Clear Deliverables. We don’t send over dense data books and PowerPoint decks for you to interpret; our deliverables lay out a visual picture of the items’ relative importance in the set, the percentage of the population reached by this set, and the return gained by adding each additional product to the set.
- Consumer Choice Exercises. Kelton’s Consumer Choice Exercise better simulates actual consumer behaviors by not relying on typical ranking scales, which often lead to heavily clustered and undifferentiated results. In these easy-to-understand, cross-cultural exercises, consumers simply make two choices from a set of items – most and least favorite – more effectively establishing the value of each item in the set.
- Multiple Lineups. Kelton will present you with a set of possible lineups to test, including our recommendation. In a strategic work session with all stakeholders involved, we will work with you to hone the set down to the best possible lineup in light of research objectives, market health, and the competitive climate.