How to determine the right price in a non-competitive context?
The client’s question
Our client, Joel, who works at a distributor of specialty batteries was struggling with setting the right price for his products. Since specialty batteries are rarely sold in a competitive context, but mostly in the context of having only one brand available, he was not so much interested in how other brands price their products. Rather, he wanted to investigate consumers’ price perception and price sensitivity of their 3 types of specialty batteries (2032, 312 and N) to ensure they are charging the optimal price while staying in line with consumer expectations.
To answer Joel’s questions, we offered the following approach:
- Price awareness questions offered us insight to how aware consumers are of current market prices
- Van Westendorp Price Meter to explore consumers’ price sensitivity by asking at what price they consider the item to be expensive, cheap, too expensive, and so low it makes them doubt the product’s quality. This provided us with an optimal price range at which to price the specialty batteries.
- Because Van Westendorp Price Meter does not measure propensity to buy, we added two Purchase Likelihood questions, referring to how likely consumers’ would be to buy the product at the price they indicated as “cheap” and at the price they indicated as “expensive”.
With this, we were able to provide Joel with the necessary information to set prices in a context that matches consumer perception and expectation. We found that, since consumers’ price awareness was relatively low in this specific product category, he had room to increase prices and still match consumer expectations, thereby increasing product margins and revenue. By choosing a simpler approach excluding competition, a quick answer was found for Joel’s business question.