Price Optimization & Sensitivity Analysis Research
What is it? Price optimization & sensitivity analysis research is the use of statistical analysis and modeling to determine the ideal price points for a product or service that maximizes revenue, profit, or market share—based on customer demand, willingness to pay, competitive landscape, and cost structures. In addition, it is also used to models how customers will respond to different prices for its products and services through different channels. Some of the techniques we use for pricing research include:
- Conjoint analysis
- Van Westendorp price sensitivity meter
- Gabor-Granger pricing
- A/B testing
- Elasticity modeling
- Competitive price benchmarking
When should you use it? Pricing research is commonly an effective research process to use in the following scenarios and use cases:
- Launching a new product or service
- Entering new markets or segments
- Changing pricing models (e.g., subscription, freemium, bundles)
- Experiencing low sales or profit margins
- Facing strong competition or market saturation
- Testing promotional discounts or dynamic pricing
The ultimate pricing dilemma that organizations face in priding decisions can be best summed up by the following question: How should I price my offerings such that they are attractive enough for my target customers to purchase while at the same time not leaving money on the table? The techniques outlined above simulate market conditions and model the purchasing decision to provide answers to this question, ultimately aligning your pricing with value received by your target customers.
