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 Price
Point Analysis
Struggling to get
the customer 'from price' and into 'specific preferences'
that you can supply and that they are willing to
pay for?
Getting to grips with a customers' fundamental
priorities is usually achieved through face to face discussion,
however these are often simple and idealistic, taking no account
of the 'trade-offs' customers make in given situations.
Price Point Analysis
Price Point Analysis is a technique used
by Imonic to uncover real bottom line insight to understand
and measure individual priorities your customers have. This
technique allows us to throw some light on the hidden rules
customers use to make 'trade-offs' between different products
and services and to uncover the values they place on individual
features.
Its best use is in price sensitive markets or where you see
future margins threatened and where you are not the lowest
cost provider. Price Point Analysis is a natural extension
to Imonics' 'Moments of Truth' style Key Account Survey, which
as a platform provides a lead-in to explore further detailed
customer views. It consists of a series of 'forced choices'
of preference, over a number of product or service attributes,
e.g. if we were to examine, 'Price Vs Quality', 'Quality Vs
Delivery', 'Delivery Vs Packaging', 'Packaging Vs Price',
'Delivery Vs Price', 'Quality Vs Packaging', etc.
Statistically, by comparing the weighting given by the customer
to each of the permutations of the four variables we can identify
current priorities, we can then test this further by moving
one of the variables and re-testing, e.g. if the price point
were moved up a level, if delivery was next day instead of
two days, if split quantity packaging were available, or there
was a measurable quality improvement and so on.
Once you are able to prioritise what the customer values,
the result is that these various choices and ratings have
mapped out the customers 'order of needs'. The next step would
be to identify who the customer perceives is best in the marketplace
for each individual priority.
What will Price Point Analysis do
for me?
This approach will allow you to:
- Work on the 'Right
Things' (Concentrate on, and match your services
to a customers preference)
- Determine Customer
Vulnerability (If a customers' priorities do not
match well to your strengths, e.g. If a customer is totally
price driven, then you know lowest cost supplier will always
win. However, if quality is the is the priority, then work
must focus on differentiating yourselves in this area, report
rigidly on quality, react very fast to quality problems,
pre-advise even minor changes to the standard etc.
- Gain a clear understanding of customers'
'Order of Needs'
- Test your price against other customer
priorities and identify the 'Price
Point' at which priorities change.
Please Test Our Concept - See for
Yourself
Motorcars are one of the best and
simplest ways to test this approach amongst your colleagues
over coffee or lunch. Take 3 or 4 standard vehicles, all one
type e.g. saloon, sports or estate. Identify 4 or 5 features
e.g. price, badge, interior, performance etc. then identify
the choices of your colleagues, then move some of the features,
eg price stays the same, leather interior is dropped for cloth
or vice - versa.
Test the price point (up) and change the features (down) and
see which features they are willing to sacrifice and which
they are not, ultimately see how long a colleague stays loyal
to his or her vehicle choice.
Faced with having to sell them a new vehicle, add-ons and
options, how much easier would it be when you know this information?
Consider the advantages
of this approach with your own products or services.
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