Esomar Webinar Pricing Research: Assessing Implicit Price Knowledge and Price Expectations of Consumers and Customers
 

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Esomar Webinar Pricing Research: Assessing Implicit Price Knowledge and Price Expectations of Consumers and Customers

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According to common beliefs, customers deliberately decide to evaluate prices against a limited number of actively recalled price experiences and therefore price evaluation is seen as a result of a ...

According to common beliefs, customers deliberately decide to evaluate prices against a limited number of actively recalled price experiences and therefore price evaluation is seen as a result of a conscious, time-consuming and laborious intellectual effort.

Current neuropsychological findings differ from this perspective: When encountering information about prices, most customers and consumers instantly and involuntarily experience them as belonging to a continuum ranging from “cheaper” to “more expensive” than expected. Such price expectations are the first and most basal stage in the evaluation of prices. An unexpected price elicits surprise which focuses attention and motivates a more elaborate evaluation of the price information. On the other hand, an expected price is likely to be ignored in the further purchase decision process.

Up to now, pricing research struggled to assess price evaluation at this early but crucial stage. All traditional pricing research tools either directly request a deliberate and elaborate price evaluation or indirectly assess it as price-dependent purchase intention. In other words, traditional tools compel respondents to apperceive price information which might have been ignored in reality.

This webinar presents a new pricing research tool developed and exclusively offered by Harris Interactive. The price.condenser approach combines a new query utilising the natural price evaluation process with an adaptive survey design. Unlike traditional pricing research tools, it does not enforce an artificially sophisticated price evaluation, but taps into the implicit price knowledge of consumers and customers. Listen as we demonstrate the functions of this new tool and discuss its added benefit compared against traditional tools.

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  • Kostenorientierung – Deckung von Herstellungs- und Vertriebskosten, Erzielung der Zielmarge  Nachteil: ggf. Nichtausschöpfung einer prinzipiell höheren Zahlungsbereitschaft <br /> Marktorientierung – Orientierung an Wettbewerbern (und der vermuteten Wettbewerbsfähigkeit)  Nachteil: siehe oben, ggf. Überschätzung der Zahlungsbereitschaft und Marktanteilsverlust <br /> Dritte Option – dynamisches Pricing entsprechend der aktuellen Nachfrage (z. B. Fluglinien)  kommt nur für bestimmte Güter / Dienstleistungen in Betracht <br />
  • SR-Forschungsansatz (Lernpsychologie, 20. Jh.): Vermittelnde Prozesse zwischen Stimulus und Reaktion werden nicht beachtet, es zählt einzig die Reaktion auf Stimuli <br />
  • Zwei Grundvarianten (siehe Slide zuvor): <br /> a) Preisschwelle („Welcher Preis ist günstig / angemessen / teuer …“  Nennung des entsprechenden Preises durch Befragten <br /> b) Vorgabe eines Preises  Nennung der Kaufbereitschaft durch den Befragten <br />
  • Die Analyse der vermittelnden Prozesse zwischen Stimulus und Reaktion zeigen die Ursachen für abweichende Reaktionen auf denselben Stimulus auf  die Prognostizierbarkeit von Preisreaktionen wird dadurch deutlich erhöht <br />
  • For instance – looking at two virtually identical apples – I could be motivated to act (and buy) in an environmentalist friendly way and to choose the one from organic farming. <br /> Guiding motives and motivational orientations in a category? <br /> Impact on price awareness, price knowledge, price evaluation? <br />
  • Perception, mental procession and representation of price information, its impact on price evaluation and consumer behaviour <br /> Since I know that organic farming consumes more labour, time and expensive resources I also know that 2,99 - a 50% price premium over normal apples – is an acceptable price. <br />
  • Emotional reactions to price information and its impact on price evaluation and consumer behaviour <br /> Apples from organic farming for 1.99 per kilo – I am delighted to find such a bargain – despite a price premium of 100%. <br />
  • …but there could still be hurdles to actually buy the organic apples, since I know that my children are disgusted by product from organic farming. Apple Pie with cream is maybe the closest I can get them to healthy apples. <br /> Hurdles between willingness to buy and actual purchase, determination to overcome them <br />
  • But how accurate is price knowledge? Here is some data about what German consumer know about prices of every day goods – all of them top products in their category. <br /> Insgesamt schlechtes Preiswissen mit deutlicher Tendenz zur Preisüberschätzung  Schlussfolgerungen: <br /> Preise werden eher selten beachtet und im Kaufentscheidungsprozess berücksichtigt <br /> Preisforschungsverfahren, die mit Preispunktschätzungen arbeiten (z. B. Van Westendorp), setzen ein Preisbewusstsein voraus, das häufig gar nicht gegeben ist <br /> Preisforschungsansätze, die mit preisabhängigen Kaufbereitschaftseinschätzungen arbeiten (z. B. Gabor-Granger), zwingen den Befragten Preisinformationen auf, die in der Realität häufig gar nicht beachtet werden <br /> Damit klafft eine Lücke zwischen conjointanalytischen Verfahren, die von diesen Validitätsbedrohungen nicht oder nicht so stark betroffen sind, und den übrigen Verfahren <br /> Conjointanalytische Verfahren sind aber nicht in allen Situationen einsetzbar – innovative Konzepte mit vager Zielgruppe ohne direkte Wettbewerber mit erklärungsbedürftigen Leistungsmerkmalen ohne etabliertes Preisniveau <br />
  • Two simple reasons – it‘s easy AND can be applied to new ideas and concepts BEFORE they can be rationally structured into attributes and attribute levels. <br />
  • For instance you could ask me about a helicopter – I do not intend to purchase one at all nor do I have any idea about prices for it. <br /> But that‘s the sitzuation we are placing respondents in when we are asking about novel products. <br />
  • Here is an example – 44% of those respondents who had previously told a price of 15€ or higher, 16, 17 or even 20€ as being so cheap that they would doubt the quality of the offer - nevertheless decided to buy a ticket for 14€. <br /> Such contradictions cast serious doubts upon the reliability of the price responses and also upon the validity of the results of the analysis. <br />
  • Expertise – Guiding motive price performance ratio <br /> Enthusiasm – Guidinig motive perfomance, price of lower importance <br /> Bargain hunting – Guiding motive price, performance of lower importance <br /> Indifference – Guiding motive undemanding decision process <br />
  • For instance you could ask me about a helicopter – I do not intend to purchase one at all nor do I have any idea about prices for it. <br /> But that‘s the sitzuation we are placing respondents in when we are asking about novel products. <br />
  • For instance you could ask me about a helicopter – I do not intend to purchase one at all nor do I have any idea about prices for it. <br /> But that‘s the sitzuation we are placing respondents in when we are asking about novel products. <br />
  • And here is an example <br />
  • One provider addressing two guiding motives – best net quality (regardless of price) versus undemanding decision process (market leader) <br />
  • The Triple-Code-Model (Dehaene and Cohen, 1997) differentiates between three ways for the mental representation of numeric information <br /> Auditory verbal code (AVC) – as word <br /> Visual arabic code (VAC) – as symbol <br /> Analogue magnitude code (AMC) – as a place along a vector from low to high numeric values <br /> The three codes are used for specific tasks <br /> AVC – retrieval of memorized results of (simple) arithmetic operations <br /> VAC – execution of (complex) arithmetic operations <br /> AMC – Magnitude comparisons <br /> Switch of representation system is cognitively demanding and error-prone <br />
  • Der analoge Größen-Code wird subjektiv erfahren als unmittelbare, intuitive Einschätzung von Zahlangaben entlang eines Kontinuums („groß vs. klein“, „billig vs. teuer“), wobei Hintergrundinformationen subjektiv unmittelbar zur Revision der Einschätzung führen können („1,75 m ist für Männer eher klein, für Frauen eher groß“) <br /> Model T – woran hätte ein Befragter 1909 – dem Geburtsjahr des Model T – den Preis festmachen sollen? Kontext Luxusgut oder Kontext Pferdewagen? Wäre er überrascht gewesen, ein Auto zum Preis eine Pferdewagens zu bekommen? <br />
  • Das Preiswissen ist größtenteils implizit im analogen Größen-Code mental repräsentiert <br /> Konkrete Preiserlebnisse werden nur in Ausnahmefällen im episodischen Gedächtnis gespeichert <br /> Konkrete Preise werden nur in Ausnahmefällen visuell oder auditiv abgespeichert <br /> Das implizite Preiswissen besteht aus Preiserwartungsbereichen, nicht konkret erinnerten und erwarteten Preispunkten <br /> Preisforschungsansätze sollten auf Preispunktschätzungen verzichten <br /> Die Übersetzung eines implizit erwarteten Preisbereichs in eine konkrete Preisschätzung ist kognitiv aufwändig und wenig genau <br /> Preispunktschätzungen können den eigentlich interessierenden Sachverhalt Preiserwartungsbereich prinzipiell nur unzureichend abbilden <br />
  • Preise außerhalb des Erwartungsbereichs lösen Überraschung aus, wodurch eine vertiefende Preisanalyse motiviert wird <br />
  • Bsp. Aufforderungscharakter - Preisfreude durch unerwartet günstige Preise motiviert zum erneuten Aufsuchen der Einkaufsstelle <br />
  • Außerdem: <br /> - Befragungsökonomie durch Testung mehrerer Preispunkte pro Durchgang <br /> - Messtheoretische Fundierung durch Analyse der nächstgelegenen Nachbarn <br /> Auswertbarkeit von Preiserwartungsbereichen auf Individualebene <br /> Erschwerung strategischen Antwortverhaltens (immer günstigster Preis) <br />
  • Warum nicht direkte Vorgabe der Preise? <br /> Erschwerung von Manipulationsversuchen <br /> Verwendung von „natürlichen“ Urteilsheuristiken (vgl. Schwellenpreise – Entscheidung über erste Stelle, dann Entscheidung über die beiden verbliebenen Kombinationsmöglichkeiten) <br /> „Messtheoretische“ Überlegungen <br /> Konstrukt – Preiserwartung mit differierender Erwartungskonformität entlang des Preiskontinuums  Punkt im Kontinuum mit höchster Erwartungskonformität, abnehmende Konformität mit zunehmender Entfernung von dem Punkt <br /> Operationalisierung – Wahl des erwartungskonformsten Preises aus n Preisvorschlägen <br /> Axiom – eindeutige Rangreihung der Erwartungskonformität jeweils in Aufwärts- und Abwärtsrichtung von der max. Preiserwartung her gesehen <br />
  • Contract directly signed with Deutsche Telekom <br /> Contract period 24 months <br /> Internet flat rate <br /> Highspeed volume limited to 2 GB <br /> Telephone and short message flat rate in all networks <br />

Esomar Webinar Pricing Research: Assessing Implicit Price Knowledge and Price Expectations of Consumers and Customers Presentation Transcript

  • 1. Assessing Implicit Price Knowledge and Price Expectations of Consumers and Customers Dr. Thomas Rodenhausen Harris Interactive AG © Harris Interactive 12/06/13 1
  • 2. Pricing – a few simple introductory remarks • Setting the price is a key decision in marketing • strong leverage on profit – increasing it by a few % can translate into a much stronger profit increase • …but it can also make the product / service unattractive and can drive sales down disproportionally …and the other way around • There are two obvious ways of setting prices: - Knowing your cost and adding some profit margin – cost based (+) pricing - Knowing your competitors‘ prices and putting yourself in the middle of the competition – market based pricing © Harris Interactive 2
  • 3. Pricing – pros and cons of both approaches to pricing + Easy access to valid information! Cost of production © Harris Interactive 4
  • 4. Pricing – pros and cons of both approaches to pricing + Easy access to valid information! Market prices © Harris Interactive 5
  • 5. Pricing – pros and cons of both approaches to pricing - market based pricing: Competing on a transparent market with decreasing margins over time. => You will try to evade the competition, for example by making your product more unique, less comparable. But as soon as you have achieved that the question appears anew: What to take for this new feature, the new benefit that you offer? - cost based pricing (innovative product!): You never know what your customers are ready to pay for it. => origin of pricing research – to know the value of a new feature or a whole new product for the prospective customer -> value based pricing © Harris Interactive 6
  • 6. Pricing research – just asking respondents • The obvious way of doing this is: Just ask you customer! • And this is what market research does for more than half of a century: Giving customers a description of a product or a service with some novel feature and then asking what they would be ready to pay for it. © Harris Interactive 7
  • 7. Applied pricing research – Consumer as blackbox S(timulus) R(eaction) Verbal description of a „price threshold“ Corresponding „threshold“ price Price Willingness to buy (at the price) O(rganism)? © Harris Interactive 8
  • 8. Applied pricing research – Consumer as blackbox Van Westendorp Price Sensitivity Verbally described price thresholds Respective price points Gabor Granger Method Varying price points Willingness to buy at these prices Brand-Price-Trade-Off Different brands at varying price points Willingness to pay for brands Conjoint analysis Products at varying prices with varying features Preferences depending on price and product features Products at varying prices with varying features Choices depending on price and product features Choice-based conjoint analysis © Harris Interactive 9
  • 9. Psychological pricing research – Mediating processes Motivation? Motivation? Cognition? Cognition? Emotion? Emotion? Volition? Volition? © Harris Interactive 10
  • 10. Psychological pricing research – Motivation Motivation Motivation © Harris Interactive 11
  • 11. Psychological pricing research – Cognition Cognition Cognition © Harris Interactive 12
  • 12. Psychological pricing research – Emotion Emotion Emotion © Harris Interactive 13
  • 13. Psychological pricing research – Volition Volition Volition „My children are „My children are disgusted.“ disgusted.“ © Harris Interactive 14
  • 14. How accurate is consumers’ price knowledge? Estimated normal price (E) Actual retail price (A) Abs[(A-E)/A] (A-E)/A Persil (Washing powder) €5.35 €5.45 33% 0% Lenor (Fabric softener) €2.80 €1.45 95% -93% Pril (Dishwashing liquid) €1.76 €1.35 39% -28% Schauma Shampoo €1.81 €1.65 30% -10% Drei-Wetter-Taft (Hairspray) €2.33 €1.75 40% -33% Palmolive (Dishwashing liquid) €2.05 €1.25 66% -64% Product Eberhardt, T., Kenning, P., Schneider, H. Kennt der Kunde Ihre Preise? Projektbericht. Friedrichshafen 2009. © Harris Interactive 15
  • 15. Van Westendorp Analysis At what price would you At what price would you begin to think product is a begin to think product is a bargain – a great buy for the bargain – a great buy for the money? money? At what price would you At what price would you begin to think product is so begin to think product is so inexpensive that you would inexpensive that you would question the quality and not question the quality and not consider it? consider it? At what price would you At what price would you begin to think product begin to think product getting expensive but you getting expensive but you still might consider it? still might consider it? At what price would you At what price would you begin to think product is too begin to think product is too expensive to consider? expensive to consider? © Harris Interactive 16
  • 16. Valid results based on inaccurate price knowledge? • Van Westendorp question: At what price would you begin to think the product is getting expensive but you still might consider it? 1) Considering lack of price knowledge – how valid will answers be at all? 2) VW suggests that each respondent has at least mild purchase intent. In reality that is not a given – it has to be tested and accounted for! © Harris Interactive 17
  • 17. Van Westendorp – contradictions the technique can’t cope with Long distance coach chosen at a ticket price of 14 Euro No (n=103) „Ticket price so cheap that I would doubt quality and safety“ Yes (n=106) Less than €15 60% 56% €15 or more 40% 44% 44% of the respondents who would choose a long distance coach at a ticket price of 14 Euro would doubt its quality and safety at a ticket price of 15 Euro or more. © Harris Interactive 18
  • 18. Price.Calibrator – segmenting for Price and Product knowledge Price Performance © Harris Interactive 19
  • 19. Price Calibrator: Assessing knowledge for price AND product • List of 20 Items to assess price and product knowledge • Example item for product I tend to notice changes in product characteristics of <category> only weeks later • Example item for price I do not spend more than absolutely necessary on <category> © Harris Interactive 20
  • 20. Price Calibrator: How to use it 1) Calibration – applicable to all pricing research instruments • In general less weight for responses from people who do not care and do not know about prices i.e. Indifference Enthusiasm • In general more weight for responses from people who do care and do know about prices Bargain hunting Experts 2) Know the composition of your customer base! © Harris Interactive 21
  • 21. Segment shares – Mobile phone contracts (Smartphone users) Eigenstudie Harris Interactive AG, Januar 2013 © Harris Interactive 22
  • 22. Guiding motives – Implications for applied marketing T-mobile addresses two different T-mobile addresses two different guiding motives – best net quality guiding motives – best net quality (regardless of price) vs. undemanding (regardless of price) vs. undemanding decision process (market leader) decision process (market leader) Expertise Enthusiasm Bargain hunting Indifference Eigenstudie Harris Interactive AG, Januar 2013 © Harris Interactive 23
  • 23. Pricing for innovative products or intransparent markets • For innovative products – you might not know your customers. It might even be difficult to describe them • Particularly at early stages, when you are deciding whether to pursue the idea further and you do not know exactly what attributes will be characteristic for the product and what attribute levels reasonable / feasible. • So – a conjoint approach will not be feasible • Van Westendorp or Gabor Granger will possibly not be relevant – since many respondents will not be interested in buying the product at all – but you are suggesting it in your questions! © Harris Interactive 24
  • 24. Prices as numerical information – Neuropsychological findings Magnitude comparisons – •Experienced as spontaneous, instantaneous, effortless, with fluent changes of reference frames •Based on actual experiences and normative beliefs  „Expectations“ Dehaene, S., Cohen, L., 1997. Cerebral pathways for calculation: double dissociation between rote verbal and quantitative knowledge of arithmetic. Cortex 33, 219– 250. © Harris Interactive 25
  • 25. Analogue magnitude code – Example body height 15th c 18-35 Male 19th c 36-50 21st c 51+ 15th c 1.75 m 18-35 Female 19th c 36-50 21st c 51+ © Harris Interactive 26
  • 26. Analogue magnitude code – Implications for pricing research © Harris Interactive 27
  • 27. Expected prices and emotions – Surprise Optional Optional g g ciin cn i pr i ll p r ls!! na o on a too ls io diitti ch to d r ch Trra ea r T a s ea e rre s Optional © Harris Interactive 28
  • 28. Price emotions – Behavioural functions © Harris Interactive 29
  • 29. Price expectations – Neuropsychological evidence Presentation of products and varying prices Simultaneous measurement of cortical activity (EEG) Identification of specific patterns of cortical activity depending on congruity between prices and expectations Der Spiegel, 41/2013, p. 144 © Harris Interactive 30
  • 30. Implementing these findings in conventional survey research
  • 31. Implementing these findings in conventional survey research
  • 32. Implementing these findings in conventional survey research Basic task – Ordering three digits in a way best reflecting one‘s price expectation © Harris Interactive 33
  • 33. Why we bother respondents with this kind of query The price.condenser query utilizes everyday heuristics for the evaluation of price information thus being less (!) complex and difficult to answer than a query which prompts prices 12 € Very cheap 21 € Cheap 102 € Expensive 120 € Very expensive 201 € Very expensive 210 € Very expensive  CHOICE © Harris Interactive 34
  • 34. Estimating the range of expected prices • The expected price range is assessed by analysis of the neighbors (l, u) of the chosen prices (c) First task: 0-1-2 – €12, €21 , €102, €120, €201, €210 €21 (g) €12 (u) €102 (o) Second task: 2-0-3 – €23, €32, €203, €230, €302, €320 €32 (g) €23 (u) Third task: 3-5-0 – €35, €53, €305, €350, €503, €530 €35 (g) €53 (o) © Harris Interactive 35
  • 35. First task – Fixed (rough estimation) Combinations Choice Lower bound Upper bound 15,900 59,100 Prior - - 19,500 91,500 15,900 0 19,500 51,900 95,100 Resulting 0 19,500
  • 36. Second task – Fixed (rough estimation) Combinations Choice Lower bound Upper bound 01,900 19,000 Prior 0 19,500 09,100 90,100 19,000 10,900 90,100 10,900 91,000 Resulting 10,900 19,500
  • 37. Third task – Fixed (rough estimation) Combinations Choice Lower bound Upper bound 02,800 28,000 Prior 10,900 19,500 08,200 80,200 20,800 08,200 28,000 20,800 82,000 Resulting 10,900 19,500
  • 38. Fourth task – Fixed (rough estimation) Combinations Choice Lower bound Upper bound 04,600 46,000 Prior 10,900 19,500 06,400 60,400 06,400 04,600 40,600 40,600 64,000 Resulting 10,900 19,500
  • 39. Fifth task – Random (correction of rough estimation if necessary) Combinations Choice Lower bound Upper bound 04,700 47,000 Prior 10,900 19,500 07,400 70,400 07,400 04,700 40,700 40,700 74,000 Resulting 10,900 19,500
  • 40. Sixth task – Random (correction of rough estimation if necessary) Combinations Choice Lower bound Upper bound 01,500 15,000 Prior 10,900 19,500 05,100 50,100 15,000 10,500 50,100 10,500 51,000 Resulting 10,900 19,500
  • 41. Seventh task – Adaptive (fine tuning based on prior responses) Combinations Choice Lower bound Upper bound 12,400 24,100 Prior 10,900 19,500 14,200 41,200 14,200 12,400 21,400 21,400 42,100 Resulting 12,400 19,500
  • 42. Eigth task – Adaptive (fine tuning based on prior responses) Inconsistent responses Inconsistent responses will be ignored (10,800 will be ignored (10,800 and 18,000 would have and 18,000 would have been ok) been ok) Combinations Choice Lower bound Upper bound 01,800 18,000 Prior 12,400 19,500 08,100 80,100 08,100 01,800 10,800 10,800 81,000 Resulting 12,400 19,500
  • 43. Ninth task – Adaptive (fine tuning based on prior responses) Combinations Choice Lower bound Upper bound 12,300 23,100 Prior 12,400 19,500 13,200 31,200 21,300 13,200 23,100 21,300 32,100 Resulting 13,200 19,500
  • 44. Tenth task – Adaptive (fine tuning based on prior responses) Combinations Choice Lower bound Upper bound 14,500 45,100 Prior 13,200 19,500 15,400 51,400 15,400 14,500 41,500 41,500 54,100 Resulting 14,500 19,500
  • 45. Eleventh task – Adaptive (fine tuning based on prior responses) Combinations Choice Lower bound Upper bound 12,800 28,100 Prior 14,500 19,500 18,200 81,200 18,200 12,800 21,800 21,800 82,100 Resulting 14,500 19,500
  • 46. Twelth task – Adaptive (fine tuning based on prior responses) Combinations Choice Lower bound Upper bound 12,500 25,100 Prior 14,500 19,500 15,200 51,200 15,200 12,500 21,500 21,500 52,100 Resulting 14,500 19,500
  • 47. Thirteenth task – Adaptive (fine tuning based on prior responses) Combinations Choice Lower bound Upper bound 13,600 36,100 Prior 14,500 19,500 16,300 61,300 13,600 0 16,300 31,600 63,100 Resulting 14,500 16,300
  • 48. Fourteenth task – Adaptive (fine tuning based on prior responses) Combinations Choice Lower bound Upper bound 12,600 26,100 Prior 14,500 16,300 16,200 61,200 16,200 12,600 21,600 21,600 62,100 Resulting 14,500 16,300
  • 49. Test run output – Precise results on an individual level
  • 50. A simple example: Sixpack Beck‘s Pils (0.33l) Average retail price: €3.75 „Normal price“: €3.28 „Optimal price“: €3.02 Eigenstudie Harris Interactive AG © Harris Interactive 53
  • 51. A simple example: Sixpack Beck‘s Pils (0.33l) Average retail price: €3.75 © Harris Interactive 54
  • 52. Conclusion – The … © Harris Interactive 55
  • 53. Harris Interactive AG Dr. Thomas Rodenhausen, President Harris Interactive AG Beim Strohhause 31 20097 Hamburg © Harris Interactive 12/06/13 56