How does market research help set prices?

1 Understand customer value

Market research can help you understand how much value your customers perceive in your product or service, and how much they are willing to pay for it. Value is not just based on the cost of production or the features of the product, but also on the benefits, emotions, and experiences that the product provides. By conducting surveys, interviews, focus groups, or experiments, you can measure how your customers value your product compared to other alternatives, and what factors influence their purchasing decisions. This can help you set a price that reflects the value that your customers perceive, and that maximizes your revenue and profit.

2 Identify market segments

Market research can help you identify different groups of customers who have different needs, preferences, and behaviors. These groups are called market segments, and they can be based on demographics, psychographics, geography, or other criteria. By segmenting your market, you can tailor your product and price to each segment, and target them more effectively. For example, you can offer different versions of your product with different features and prices, or you can use discounts, coupons, or bundles to attract different segments. This can help you increase your market share, customer loyalty, and differentiation.

4 Test price changes

Market research can help you test how your customers react to changes in your price, and how your competitors respond. By conducting experiments, such as A/B testing, you can compare the effects of different prices on your sales, revenue, profit, customer satisfaction, and retention. You can also monitor how your competitors adjust their prices, and how that affects your competitive position. This can help you optimize your price, and avoid mistakes that could harm your business.

5 Monitor price performance

Market research can help you monitor how your price performs over time, and how it affects your business outcomes. By tracking and evaluating key indicators, such as sales volume, revenue, profit margin, market share, customer feedback, and customer lifetime value, you can measure the impact of your price on your business performance. You can also compare your price with your competitors' prices, and with the industry benchmarks. This can help you identify opportunities and challenges, and adjust your price accordingly.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?