How do you conduct a market analysis for pricing strategy purposes?

One of the things that has aided my success in defining markets for new products and services has been actual discussion with the various people who will use the product or utilize the service. Asking key questions and letting the prospective users actually tell you how your product or service will help them meet real-world demands is a must when developing a market strategy!

Customer segments is where everything starts, or stops. If the audience of your research does not match your target audience/ideal customer you can basically disregard the results. To oversimplify: Don't ask a vegetarian person how much they would be willing to pay for a steak.

Defining a market can be very different depending on end-user, B2C, or B2B requirements. I have found that you need to understand the personas within your scope to get to a true market definition.

This is 101 in Marketing/Pricing. In 2019-20, when UPI-based financial transactions took off in India, the sales of candies & confectionaries dropped strangely. Apparently in India, every supermarket or store hands over candies instead of short change after a check-out. If questioned, they would state they don't have enough change to give us back. This shot up the sales of candies worth 1/2/3 Rs through the roof. And when UPI disrupted the FinTech industry in India, it affected the sales of these candies as every store now was getting paid the exact change by the customers. Hence, we need to think outside the box and read between the lines to envision our next big competitor. This remains the first step in crafting a pricing strategy.

O primeiro passo é entender se pre?o é uma variável na árvore de decis?o do produto. Se for, o qu?o forte é. Falo isso porque alguns produtos s?o inelásticos na rela??o pre?o - demanda. Em sendo uma variável na árvore de decis?o, cabe a pricing entender alguns pontos: - qual a elasticidade total e as cruzadas com a concorrência e com o próprio portfólio e como os movimentos de alta e queda da demanda + os coeficientes de elasticidade impactam no resultado; - quais os ranges de pre?o nos quais a demanda se concentra; - quais s?o as disposi??es a pagar daquele produto e como se relacionam com o volume. - há espa?os "em branco" em um determinado nível de desembolso de pre?o no qual poderíamos atuar?

Estimating the total available market and your serviceable share of that can be daunting. I recommend starting with a top down approach that is easy to understand and set some reasonable expectations before refining this with bottom up forecasts. Uber for example sized its "realistic success scenario" in its 2008 pitch deck by using the $4.2B total taxi and limousine market and assuming a 5% market share in the top 5 cities to generate $20M-$30+M annual profit.

?? Assessing market size involves a triangulation of methods: ?? Top-Down Approach: Begins with total GDP ?? Breaks it down into relevant categories ?? Estimates market size based on economic indicators ?? ?? Bottom-Up Approach: Starts with individual customer spending ?? Aggregates data for all customers ?? Calculates market size at a granular level ?? ?? Triangulation: Combining both approaches provides a more accurate estimate ?? Minimizes biases and errors ?? Offers a comprehensive understanding of the market ?? ?? Balancing top-down and bottom-up methods ensures a robust market size assessment, helping businesses make informed decisions. I discuss this in my book Real Impact Marketing in more depth.

Assessing demand involves estimating the size, growth, and potential of your customer segments using data sources like industry reports, surveys, and sales records. For example, you may find that customers value ethically sourced coffee but are sensitive to shipping costs and delivery times.

Testing is the key, but of course, without alienating. Data is always a good source to find out what you need to test. Data can tell if your prices are too low or too high, your customer's willingness to pay, your organic traffic, and everything. Historical sales data, social media engagement scores, Google trends, and keyword research, and competitor analysis are some of my favored ones to start with.

While we understand the pricing strategy of the competition the key is to see what differentiate you from the competition and how can they help defining the price. For an example if competition is focused more on mass market with no distinctive benefits , but if you bring in a more higher order value added product positioned at higher end consumer who seeks those benefits, then your pricing can be much more premium to competition. So the two need to go hand in hand.

When I was fundraising for ergo, one of the top questions I was asked by potential investors was, "Who are your competitors?" Every company should be really familiar with who else is out there and what they are doing.

If demand increases, instead of raising prices, focus on adjusting our supply considerations. This allows you to meet the higher demand without compromising on affordability. Loyal customers, who played a key role in driving the demand, continue to benefit from great deals. By maintaining competitive pricing, you reward their loyalty and ensure they remain long-term customers. This approach not only supports customer retention but also strengthens your market presence over time.

I definitely agree, studying your competition is not just a smart move, but a crucial part of market research. It gives you an understanding of the pricing landscape and helps you position your own products competitively.

Analyzing supply involves evaluating the number, size, and strategies of competitors using tools like SWOT analysis and Porter's five forces. This helps you compare strengths, weaknesses, opportunities, threats, and your value proposition with competitors. For instance, you might find that competitors offer similar coffee quality but vary in pricing models, branding, and customer service.

It can be sometimes difficult to identify the market pricing trends as many companies now use dynamic pricing methods which allow them to adjust their prices depending on changing market conditions and consumer behavior patterns. This usually involves using sophisticated software algorithms related to predictive analytics & machine learning tools – allowing businesses to create real-time price changes depending on factors such as supply & demand status; location; customer demographics, etc... Traditionally these methods were used mostly by online retailers but are starting to become increasingly common amongst brick-and-mortar stores too!

Determining pricing trends requires a blend of analytics and intuition. You start by gathering data on historical pricing, sales volume, and market movements. However, the true insight lies in interpreting this data to predict where the market is heading. It's about spotting patterns, understanding the why behind them, and then forecasting their trajectory. It’s a bit like being a weather forecaster, where you need to read the signs and sometimes go beyond the models to make your predictions. This approach has been instrumental in crafting pricing strategies that are responsive, competitive, and profitable.

Determining pricing trends is pivotal for crafting a dynamic pricing strategy that adapts to market conditions. For instance, Starbucks has excelled at understanding pricing trends by continuously monitoring coffee bean prices and adjusting its menu prices accordingly. By recognizing seasonal variations and supply chain disruptions, Starbucks not only maintains its competitive edge but also ensures that its pricing strategy remains responsive to market shifts, thus optimizing revenue and customer loyalty

The final step is to determine pricing trends by examining historical, current, and projected prices for your product and its substitutes. Use methods like price tracking, elasticity analysis, and scenario analysis to understand price changes, customer responsiveness, and influencing factors. For example, you might find that coffee bean prices are affected by seasonal changes, supply shocks, and consumer trends.

Price tracking is what is working in this competitive landscape of e-commerce, as I've gotten from our software's users. Since all online sellers are tracking competitor prices and price history data, you'll leave money on the table if you are not. It's a piece of cake- a big and delicious cake- that everybody wants a piece of.

Use market analysis to price sustainable products/services: -Understand Value Perception: Research what "sustainability" means to your target customers. Are they willing to pay more for eco-friendly materials, ethical production, reduced environmental impact, etc.? -Comparable Alternatives: Analyze prices of both regular and sustainable competitors. This sets a realistic range considering what buyers are already used to paying. -Premium Justified?: Assess if you truly offer unique sustainability benefits (vs competitors). This helps decide if and by how much of a premium your market will bear. -Market analysis should reveal ways to emphasize the specific sustainability benefits customers prioritize, so the price makes sense.

A robust pricing strategy starts with asking the right questions: 1. What is the perceived value vs the alternatives? 2. What is the willingness to pay? 3. What are the pricing dynamics? ie value and price sensitivity across segments 4. What if? - scenario planning for plan a vs b 5. How does price impact access or uptake?

I ran a conjoint analysis for a hotel in Switzerland with the objective of measuring the "brand premium" by the difference in Willingness-to-pay. We learned that Asian guests are most brand-focused, Americans second, and Europeans least brand-focused. This was expected. However, what we did not expect is that family-owned hotels without a global brand can hardly win any Asian guest, as the importance of the brand outweighs any price discount. What started as a pricing study turned into a very insightful study on market segments.

“Price is what you pay, and value what you get” - Warren Buffett Measuring price along a single price dimension is therefore incomplete. Stefan Michel added an interesting comment on Swiss hotel brand values and how a pricing strategy research led to unexpected market segment insights. Similarly, understanding competitor pricing strategies and trends is helpful. Competitors turning to dynamic pricing, bundling (where allowed), capitation contracts, subscription services …. Will give valuable insights and point to untapped pockets of value or new needs by customers that need to be addressed. If Price alone is what you measure, an incomplete pricing strategy is what you get.

I'd like to think of this from 2 perspectives qualitatively before moving onto quantitative assessments. I like to think qualitatively before jumping to a $ number, as this ensures we have a clear picture of value in mind from the very outset. I'd first ask what is the price flexibility of the landscape your brand is entering into, considering elements such as level of innovation, unmet need, affordability, competitive intensity, customer value drivers. Secondly I'd move onto think of the price potential of the brand which is rely critically appraising how well your brand meets those customer value drivers. Moving on to quantitative assessment and potentially validating those findings through primary customer research.