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  • Benefits of value-based product and price positioning
  • An effective approach to quantify and leverage customer value
  • How companies are profiting through value-based positioning strategies

The Payoff of Value-Based Price Positioning

Companies that know how to identify, quantify, create, and communicate customer value can optimize margins, even in the toughest selling environments. Our experience has found that small price variations can raise or lower profitability by as much as 20 percent to 50 percent.

When Good Intentions Fall Short

Too often, when organizations do make the effort to understand customer value perceptions, their efforts fall short. Many use traditional methods to survey customers about their preferences, asking questions related to brand preference, ranking of importance on a product feature or how much would you pay for it?

While questions like these can be useful in some ways, they rarely yield the deeper information needed to create a successful product and price positioning strategy. And they won’t reveal insights that can confidently predict the success of a new product you’re planning to develop or introduce to the market.

Price Sensitivity Analysis: The Better Way to Quantify Value

Principia has found price sensitivity analysis to be an accurate and rigorous approach to uncover what customers really want and what they would pay for it. This research technique forces respondents to make difficult tradeoffs, revealing what they truly value by forcing the participant to make a tough choice. For example, which HVAC system would you prefer: a system with ten-year warranty with no energy savings or one with a five-year warranty with 10% energy savings per year.

The answers to these types of questions place quantifiable value on very specific attributes of a product or service. The benefit of this approach is that it can measure several attributes together, as well as varying degrees of attributes. The process results in extremely accurate and actionable information about such factors as desirability of various features, importance of certain features relative to others, and how much customers are willing to pay.

Price sensitivity analysis is powerful enough to create fact-based market simulation models, helping your company accurately predict which products customers will buy, even when those products are not yet on the market.

Coupled with a thorough understanding of the competitive environment and market conditions, price sensitivity analysis becomes the foundation of an actionable, successful product positioning strategy. Companies can use the information in many ways, such as:

  • Project revenue and margin streams based on different product and pricing strategies
  • Focus on key product and service features that optimize the commercialization path
  • Customize audience messaging in the value chain (contractors, builders, consultants, architects)

Principia’s price sensitivity analysis provides our clients with the detailed, accurate data they need to confidently and effectively deliver products that customers want, and price them to value. Our proven process and over 25 years of industry-specific experience can help you optimize margins and stay ahead of the competition.

Learn more about our Value-Based Pricing consulting services here.