September 13, 2021
There is a hesitancy when it comes to creating pricing strategies, due to the unpredictability of consumers’ reactions and perceived value towards a brand and product. This leaves companies at risk of either losing profit opportunities or consumers.
What companies typically do to maximize profitability, they utilize one of 3 options:
1. Increase prices.
2. Decrease fixed and/or direct cost, which may reflect on my quality as a brand and product.
3. Increase investment in communication and/or trade to maximize volume shares.
The biggest effect on profits comes from price increases, leading to the main challenge: how much should I increase prices without losing opportunities for profitability.
A solution to this dilemma is measurement tools to identify the price sensitivity before taking a pricing decision.
How do measurement tools lower the risk of losing profits or consumers?
If brands increase prices too high, consumers will buy less, or walk away to the competition.
On the other hand, if prices are too low, there is a risk of losing an opportunity for profits.
Identifying price sensitivity/elasticity with measurement tools can eliminate decisions based on experience and gut, giving us solid data when deciding on a pricing strategy. Decisions based on data analytics can lessen the risk of losing profits while optimizing your revenue growth strategies.
New research and analytical tools (Smart Value)
New research and analytical tools can provide solid data on customer reactions that can be built on to accurately decide the best price for your brand.
The outcome of this tool, will accurately measure consumer perceived value, inferring an opportunity to reflect on optimizing prices.