Pricing is a major motivator for most customers when purchasing a product or service. Customers are always looking for the best deal, an affordable but high-quality product.

Pricing surveys can help you figure out how much your product is worth to customers and how much they are willing to pay for it. These surveys remove the guesswork from determining the optimal price; the price that accurately reflects the value of your product and the highest price that customers would consider.

Why Run Pricing Studies?

Pricing is a critical component of successful product sales. When you conduct effective pricing surveys, you can set a price for your product that represents the value you’re offering and is affordable to your target audience.

No matter how valuable your product or service is, if the price is prohibitively expensive for your target audience, sales will be scarce. You also don’t want to sell yourself short by charging significantly less than your target audience is willing to pay.

Ultimately, pricing studies help you figure out the optimal price that benefits both your customers and your bottom line.

There are several methods for conducting a pricing study, and we’ll go over the most popular and effective ones in this article.

Direct vs Indirect Elicitation Pricing Methods

Direct Pricing Methods

When you use direct pricing methods, you ask customers in an open-ended format what the highest price they are willing to pay for a product is; they type in how much they are willing to pay. When asked, “What is the most you would pay for product F?” the respondent types $20.

The major downside of using this method is that it focuses solely on the optimal price rather than the motivation for its acceptability by customers.

Indirect Elicitation Pricing Methods

When using the indirect pricing method, Customers are asked how likely they are to buy a product at that price rather than how much they are willing to pay for it.

This takes the customer’s attention away from the price and compels them to consider why they would pay for such a product in the first place. Customers determine the product’s worth first, then decide whether or not they will buy it at that price.

However, indirect pricing methods are not flawless; they ignore competitor pricing, which is a major determinant of customer purchase intent.

How to Ask Pricing Questions in a Survey

The pricing survey questionnaire you use is determined by the pricing method you use. If you use a direct pricing method, your pricing questions will focus on how much customers are willing to pay for a product.

But if you use an indirect pricing method, your questionnaire will be centered on the product’s worth rather than cost.

Examples of Pricing Survey Questions

• What’s the highest amount you would pay for Product XYZ? (Direct pricing)
• What is the cheapest price you would pay for this product that would make you doubt its quality? (Direct pricing)
• How likely are you to buy this product at $5? (Indirect pricing)

• Extremely likely
• Somewhat likely
• Unsure
• Unlikely
• Extremely unlikely

[Free Product Pricing Survey Template]

Which Pricing Survey Should I Use?

 

• Van Westendorp Pricing Studies

The Van Westendrop pricing method, also known as the price sensitivity meter, helps you price a product based on your customer’s perception of its value. It’s one of the most versatile willingness-to-pay pricing models, with a high degree of accuracy. 

It defines the acceptable price range and explains why other price points are either too high or too low.

This method uses four questions to determine your product’s acceptable price range. It begins by providing your respondents with a description of your products and services, followed by the following four questions:

• The price that’s so cheap, would make respondents question the quality of the product/service
• The price that fits the product value, they can afford it but it’s not so cheap, they would question its quality
• At what price do your customers think the product/service is a bit expensive but they will still consider buying it
• What’s the outrageously high price they won’t consider buying the product?

This pricing method allows you to determine the customers’ expected pricing for your product. Also, customers’ price expectations are typically a reflection of the product’s worth to them.

Pros

• It’s easy to implement
• It’s not confined to a specific price point; it allows you to determine the acceptable price range.

Cons

• It is an isolated pricing technique; it does not compare product prices to those of competitors, which is a significant factor for most customers.
• It does not allow you to determine why customers are willing to pay a certain price for a product/service.

• Price Rating Scales

The price rating scale method asks respondents to rate their likelihood of paying a specific price for a product or service. It’s one of the simplest pricing methods; all you have to do is assess your customers’ willingness to pay a certain price.

Price rating scales assess the value customers place on a product; customer-acceptable pricing is how much the product is worth to them. If a price is acceptable to consumers, they are more likely to purchase the product; if it is not, the purchase is unlikely unless the product is an absolute necessity with no alternatives.

Also, customers usually accept more than one price for a product. So, when using this pricing method and customers accept multiple prices for a product, go as high as customers are willing to pay while keeping your competitors’ prices in mind.

Even if customers are willing to pay exorbitant prices for a product, you must price it competitively to avoid losing customers to competitors.

Example: How likely are you to pay $280 for the new Redmi Note 12?

• Very likely
• Somewhat likely
• Neutral
• Unlikely
• Very unlikely

Use Case

You’ve already chosen several prices and want to know which one will appeal to the majority of your target market.

Pros

• It’s very easy to set up
• The results are simple to analyze
• Shows a direct relationship between sales and price

Cons

• It doesn’t pinpoint the optimal price point
• You have to select the price points yourself and the optimal price may not be among them

• Gabor-Granger Price Sensitivity

This pricing method identifies the highest amount a customer is willing to pay for a product/service. 

Participants are asked if they would purchase a product at a specific price. If they say no, the algorithm automatically offers them a lower price and asks if they are willing to pay it.

The price variation process is repeated until either the respondents say yes or the product reaches its lowest price. If a participant selects yes, they are shown a higher price; the process is repeated until the product reaches its maximum price or the respondent selects no.

Pros

• It helps you identify the maximum and minimum price customers are likely to pay for a product.
• It allows you to estimate the percentage of customers who are willing to pay at a specific price point.
• Allows you to determine the price at which customers are most likely to pay for a product—the price at which you will make the most sales.

Cons

• It gives respondents a single point of reference. They may be willing to pay a certain price for a product because they don’t have an alternative.

• Conjoint Analysis

The conjoint analysis evaluates the value that customers place on specific features of your products and services. It’s one of the most complicated pricing methods, but using market research software helps randomize the combinations respondents have to choose from, making the study easier to run.

This method divides your product into key features and asks respondents to choose the combination of features they prefer. The features could be price, design, brand, and more.

Unlike other pricing methods, the conjoint analysis considers the features that customers want in a product and the price they would pay for it.

Types of Conjoint Analysis

Here are the four main types of conjoint analysis:

• Full Profile Conjoint Analysis

Participants are shown a product profile with various attributes (such as price, design, and name) and asked to select their preferred option.

This is a trade-off technique; which feature would the customer choose if they could only have one? What they value most about the product is whichever product attribute they choose.

Using the full profile method enables you to learn what your customers want from your product and tailor its features and price to meet their requirements. It also assesses how valuable a specific product profile is to customers.

• Discrete/ Choice-Based Conjoint Analysis

This is the most commonly used conjoint analysis method. It displays multiple product profiles to respondents and asks them to choose one of two at a time.

The respondents are shown various combinations of product profiles; whichever product is selected the most in comparison to others is the most preferred profile.

• Adaptive Conjoint Analysis

The smart conjoint analysis method is another name for the adaptive conjoint analysis method. It employs logic to display product profiles for participants to select from based on previous selections.

For example, if participants chose Profile X over Profile A in the previous question, Profile A will be eliminated from the following question.

This method is quite effective because it allows you to identify your customers’ most preferred product profiles from a list of profiles they like.

• Max-Diff Conjoint Analysis

Respondents use this method to select both the features they like best and the ones they are least interested in. It allows you to identify the best and worst concepts, allowing you to prioritize which features to implement and which to eliminate.

Use Case of Conjoint Analysis

It helps you identify the key features customers value in your product.

Pros of Conjoint Analysis

• Simulates real-life purchasing situations (what customers think about when shopping for a product but have multiple choices.)
• Determines optimal price using a combination of product value and pricing
• Allows you to identify the product features that are most important to customers.
• Easy method for performing competitor analysis by comparing your product profile to that of the competitor

Cons

• Respondents are prone to survey fatigue with this method
• It takes time to set up each profile, even if you use software to randomize the order of the product profiles shown to participants.

• Brand Price Trade-offs (BPTO)

This pricing strategy shows respondents multiple products at their lowest price and asks them to choose the product they prefer. The price of the product they chose is then hiked, but not of the other product, and they are asked to choose again. 

This price hike will continue until the maximum price of the product is reached or they choose a different product.

Pros

• It allows you to identify what the customers value most in a product- the features or its price
• It also allows you to determine the highest price customers are willing to pay for a specific product or brand.

Cons

• Respondents often get a sense of what the survey is about and give biased answers. For example, they may insist on paying exorbitant prices for a specific product to appear loyal to the brand.

In reality, they would not buy that product at that price. This type of response provides you with incorrect information about how much customers are willing to pay for a brand or product.

Other Pricing Studies to Consider

• Econometric Models

The econometric models track the effects of pricing on market share over time, typically monthly or quarterly. Tracking these market share effects reveals how companies can strategically price their products against inflation to meet market demand while remaining competitive.

You could also use market price changes to determine the relationship between price and demand and how it affects company sales. However, to draw valid conclusions, this method requires months of data

• Covert Pricing Experiments

It is also known as the hidden pricing strategy because it does not disclose the cost of a product or service to customers. Instead, customers must first schedule a call with the sales team to determine the cost of the product or service.

This method is commonly used when product features must be tailored to customers’ needs. It is most commonly found in enterprise SaaS pricing models.

Intercom’s pricing for “most businesses” is a good example of this pricing model. Customers would have to schedule a demo to learn about the pricing for the features they want in their plan.

 

Pros

• It allows customers to discover and understand your product features before picking a plan
• It enables you to price your products higher
• Enables you to provide customers with a great experience while learning about your products

Cons

• If the product isn’t exceptionally unique, the chances of potential customers booking a call are slim.
• It’s not a suitable pricing model  for small businesses

Conclusion

Pricing surveys are an important part of product strategy because they help you strike a balance between the price your customers are willing to pay and the profitability of your brand. 

Also, not all pricing models are appropriate for all businesses or products; you must choose a pricing method based on what you want to determine- acceptability, product value, and more.