Synopsis: Health Care — New Product Pricing Strategy
Our client developed the next generation of product in their category and turned to QDI to learn the maximum price they could charge and still hit their volume targets. Key to this learning was to make sure that the customer thoroughly understood the benefits they could receive from the new features the client was considering.
Thus, QDI consultants initially focused on talking with consumers who had recently purchased this type of product. We first discussed their present product and learned why they used it. Then the conversation moved to a discussion of problems they have had or what would have made the product better. Finally our consultants introduced each new product feature and discussed its application with consumers to determine the benefits they perceived from each feature.
These discussions help us create a benefit language, a way to talk to customers about each benefit. With this in hand we could then design an email survey through which we could reach a large enough sample to be representative of three customer groups:
- Consumers using our existing products
- Consumers using competitive products
- Consumers who had not made a purchase, but would make a decision in the next six months.
QDI blasted the email survey to 5,500 consumers who fit the sample design profile. From this we received approximately 1,000 usable responses. The survey described the new product features, using the terminology we had developed in the first phase of the project. Key to the design of the survey was to keep the consumers engaged in the discussion. To do this we used mock-up pictures to show the new product features and product concepts.
The goal was to determine the potential value of these different feature mixes to consumers. To do this QDI’s study design integrated three different approaches to determine price elasticity. These included Van Westendorp Analysis, purchase intent at multiple price points and purchase intent versus market alternatives. The reason for this approach was that we were testing a greater number of feature product variations than we could through a traditional conjoint methodology. Thus, using the three pricing approaches enable us to assess price elasticity across the variation of feature combinations.
The research results gave our client the confidence that they could price the product at a higher price point than previously considered, dramatically increasing profits, while minimizing cannibalization of the existing product lines.