When thinking about researching price, it’s important to understand the category in which your brand plays. Sounds obvious doesn’t it?

1. The Price is Right
When thinking about researching price, it’s important to
understand the category in which your brand plays. Sounds
obvious doesn’t it? But different categories not only have very
different pricing dynamics but also very different consumer
motivations and behaviours. These make some categories very
‘price elastic’ (small variations in price lead to large variations in
demand) and other categories much less price elastic
(brands can increase price with little impact on demand).
Where are different
categories on our
pricing map?
We have identified two key determinants of price sensitivity:
1. Brand differentiation. If brand propositions are very similar, consumers
are happy to substitute one with another purely based on price. There is
less willingness to do this if brand propositions are very different
2. Ease of being able to switch between brands. There may be functional
barriers to switching between brands, for example changing a utility
supplier takes effort or you may be tied into a particular smartphone
‘ecosystem’. There can also be emotional barriers to switching, such as
if you trust a particular brand of infant pain killers because you have used
them since your child was small
Differentiation between brands
Easy to substitute Difficult to substitute
No
barriers
Easy
Hard
Low High
Elastic
Inelastic
Substantial
barriers
Own label meat Lager
Toilet paper
Salty snacks
Laundry
Basic phone
Spirits
(grocery)
Luxury brands
Executive cars
Family cars
Home
Wi-Fi/ TV
Smartphones
Lottery tickets
Child
analgesics Newspapers
Insurance
Bank current
accounts /Insurance
Utilities
(gas, electricity)
Ease of
switching
Soft drinks

2. We can identify four category pricing typologies in which consumer
motivations and behaviours vary markedly
The four types of typology:
Price and Promotion Prompted – this is classic FMCG territory where
brand engagement is low and consumers will happily substitute brands if the
price or promotion is right. Typically there are high repertoire, high frequency
staple categories where price is highly visible at point of purchase
Disengaged Inertia – often low interest, infrequently purchased but essential
categories, where brand offers are similar, pricing is not transparent (think gas
and electricity tariffs…) and switching requires effort. Aggregators play in this
space as they enable price comparison and lower the barriers to switching
Desirable Premium – here brand desirability reduces price sensitivity and
choice may be limited or exclusive. Purchasing is discretionary and irregular.
In some cases higher price actually helps define quality and prestige
Emotional Captivity – the consumer may feel obligated to stay with
certain brands because they are tied in emotionally and/or there is little
alternative available…buying lottery tickets with regular numbers or long-
term devotees of a newspaper or those with a magazine subscription. Price
visibility can be low.
Differentiation between brands
Easy
Hard
Low High
Ease of
switching
Price and Promotion Prompted
“All about the deal”
Low engagement
Lots of choice
Disengaged Inertia
“Can’t be bothered”
Very low engagement
Complex/obscure choices
Desirable Premium
“Got to have it”
High engagement/
trend and socially driven
Emotional Captivity
“Can’t do without it”
Trust and security
Personal connection
Easy to substitute Difficult to substitute
No
barriers
Substantial
barriers

3. Behavioural biases over-index in different typologies
These typologies link to behavioural biases:
Price and Promotion Prompted – obviously incentive is key (“what’s in it
for me?”) and these categories typically display strong price framing and
anchoring (so brand x sits in the frozen fixture where prices are easy to
compare to brand y)
Disengaged Inertia – the effort required to change a service may discourage
switching and the consumer may worry about whether they can manage the
process (“will all my direct debits move if I change bank account?”)
Desirable Premium – consumers are affected by social acceptability (“it’s
the ‘must have’ accessory this summer!”) and by the context of seeing the
brand (“it’s a car driven by a celebrity I like”)
Emotional Captivity – the concern about what is being given up can
outweigh the negative of a price increase (“but I will lose all my apps if I
switch from my iPhone to a Samsung!”)
In both the last two typologies the emotional response (Affect bias) plays a
substantial role, for example “I like shoes and when I’m buying them I’m less
bothered by price than when buying groceries.”
Differentiation between brands
Easy
Hard
Low High
Ease of
switching
Price and Promotion Prompted
Incentive
Disengaged Inertia
Self Efficacy
Desirable Premium
Social norms
Emotional Captivity
Loss aversion
Human
behaviour
CulturalInfluence
s
Env
ironmental
Cues
Making Tools
P
ersonal Decision
-
Framing
Anchoring
Effort
Default
Messenger
Affect
Easy to substitute Difficult to substitute
No
barriers
Substantial
barriers

4. Growing brand value and reducing price sensitivity
Reducing price sensitivity will generally grow brand value. Increasing equity
and distinctiveness pushes a brand to the right. Building an emotional
connection can increase your ‘stickiness’ with customers, pushing the brand
down the map. Often low engagement brands with relatively undifferentiated
products spend a lot to build their brand equity so people have an emotional
connection. Aggregators want to take the same brands in low engagement
categories (like current bank accounts, credit cards, insurance) and force
price comparison and make the switching easier.
At Incite we use this category pricing model to make our research
more powerful.
By understanding the consumer motivations and behavioural biases we can
provide an accurate picture of the role that price plays in your category and
predict how your brand will respond to price changes.
If you are interested in finding out more, please contact Jules Berry on
+44 (0)20 7438 4982 or e-mail jules.berry@incite.ws
Differentiation between brands
Easy
Hard
Low High
Ease of
switching
Price and Promotion Prompted
Disengaged Inertia
Desirable Premium
Emotional Captivity
Increase brand
equity/increase
distinctiveness
Increase emotional
connection
Aggregators want to
disrupt barriers
Easy to substitute Difficult to substitute
No
barriers
Substantial
barriers