STEP Pricing Research

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Background

  • The Strategy Evaluation Program (STEP) was developed by Eric Marder.
  • The STEP research tool has been used in practice since 1960.
  • STEP was developed to test concepts for new products and pricing or selling strategies for existing products.
  • Field research employing the STEP method can be conducted through the mail, web or personal intercepts/interviews.

Description of How it Works

  • The competitive set to be tested is defined.
  • Respondents are recruited from the target market.
  • The sample of respondents is divided into equivalent groups.
  • Each group will be exposed to the identical aspects of the test, except the price presented for a specific product or the group of products will be different in each group.

Background

  • The Strategy Evaluation Program (STEP) was developed by Eric Marder (1).
  • The STEP research tool has been used in practice since 1960.
  • STEP was developed to test concepts for new products and pricing or selling strategies for existing products.
  • Field research employing the STEP method can be conducted through the mail, web or personal intercepts/interviews.

Description of How it Works

  • The competitive set to be tested is defined.
  • Respondents are recruited from the target market.
  • The sample of respondents is divided into equivalent groups.
  • Each group will be exposed to the identical aspects of the test, except the price presented for a specific product or the group of products will be different in each group.
  • Respondents are presented with a brand concept, image or the actual product.
  • Respondents are then asked to allocate 10 stickers across the various product offerings.
  • The respondent can allocate their stickers in any manner that best represents their likelihood to purchase the available products.
  • The share of stickers given to a brand is calculated for each respondent group.

Strengths

  • This method has been proven to be very predictive of future demand.
  • It is applicable to new product pricing research.
  • It works equally well with big ticket items worth hundreds of thousands of dollars to relatively low priced items under a dollar.

Weaknesses

  • Similar to monadic testing, each respondent group needs to be controlled to minimize sample variations.
  • A relatively large respondent sample is required.
  • Limited ability to dynamically model the competitive set and simulate competitive price changes.

Our Assessment

  • A discrete choice methodology is usually preferable because it is generally more cost effective and provides powerful competitive insight.
  • However, we would strongly recommend using STEP tests under the following specific conditions;
  • When the product attributes are fixed.
  • When an understanding of the likelihood of repeat purchasing is desired.

Notes:

(1) Marder, Eric. (1997). The Laws of Choice: Predicting Customer Behavior.