So Long Holiday Shopping; Hello, Pricing Research

The holidays are a good time to see how truly diverse consumers are. Since they’ve come and gone for another year, I’ll admit it: I enjoy last-minute holiday shopping. I may be one of the few who actually enjoy the chaos but I’m certainly not the only December 24th shopper.

At the other extreme there are those who prefer to wrap things up in August (pun intended). Point is, with plenty more unique segments between us, businesses are faced with a diverse spectrum of shoppers any day of the year. Companies in both the B2C and B2B realms need to find ways to manage the wide assortment of needs, expectations and behaviours that come with consumers.

Cue pricing research.

Pricing research is a broad area. More than just for new products or services, it looks to answer the ‘big questions’ around business needs, and is an essential component of price optimization and managing company profitability.

When asked what it really means, Greg Thomas, Vice President of Pricing Research and Analytics, says there’s no easy answer. Pricing research and analytics means different things – has different implications – depending on the organization or industry. What is for certain though, is it remains one of the most effective revenue management tools by brand or product portfolio.

“It gives businesses an effective way to connect customer segments to different levels of value insight and price sensitivity. That helps brand managers, product managers or global pricing managers create tailored product offerings that optimize revenue and boost profitability.”

Extending that further, pricing research tells us how one price change or multiple price changes will interact, how they interact with competitive products or brands, how sales volumes will change, and as price points are raised or lowered, what thresholds are approached or crossed. This is especially important if you find yourself in unchartered territory, hitting different price levels that aren’t reflected in historical sales data, or if you run the risk of cannibalizing your brand.

Companies typically rely on 1 of 3 types of pricing research: historical data analysis, competitive pricing analysis or customer focused pricing research / market research. But in order to turn any type into actionable corporate strategies, managers need effective pricing tools too.

“Pricing tools allow managers to run ‘what-if’ scenarios. If they raise the price of one SKU by 25% for example, how is sales volume and profitability of that SKU changed? How has it changed relative to the company’s entire portfolio?”

According to Greg, the real strength of pricing research is the ability to quantify price sensitivity of customers’ behaviour. Something that’s best accomplished through a survey methodology, in which case many organizations turn to conjoint or discrete choice.

Consumers are forced to make trade-offs in discrete choice models, so researchers can identify which attributes or brands have the greatest impact on the decision-making process.

The iterative nature of this type of survey methodology allows each customer or consumer to work through a different number of scenarios as researchers capture the data and measure customer reaction to price changes.

Pricing research directly engages consumers while measuring their interactions and reactions. It also helps businesses develop the price-value equation from the customer’s perspective. From this point-of-view companies can identify the key value drivers that support overall pricing strategy. Not to mention identify potential risk areas, like where the perception of price, value and adoption do not align.

Ultimately pricing research is an important part of the larger pricing management process, and not a bad way to kick-start another year of pricing.


Article written by Emily McLean in collaboration with Greg Thomas. Greg is the Vice President of Pricing Research and Analytics at Pricing Solutions, an international pricing strategy consultancy dedicated to helping clients achieve world class pricing competency. Both Greg and Emily also write for the Pricing Solutions Club.