Grow your business with consumer-driven insights

How can businesses achieve unparalleled growth and maximise profitability in today's competitive landscape? At boobook, the answer lies in our data-powered strategic consulting, anchored firmly on four interconnected pillars: brand, product, pricing, and customer/consumer. By understanding and leveraging these fundamental elements, we guide businesses toward excellence and sustainable growth.

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In the previous weeks, we discussed the connection between brand, product and pricing strategy. As we close our "Pricing 360" series, we still have one crucial topic to cover: customers/consumers. When it comes to price, product or brand decisions, it's essential to focus on the individuals or companies who buy your products or services – your customers. Your targeted customers are a crucial aspect of your strategy because they influence how you market your product and are excellent guides when determining which products to put on the market and at what price.  

To truly cater to your customers and attract new ones, you need to understand who they are, how they behave, how they feel about certain things, what motivates them, their sensitivity to price (changes), and their purchasing habits.  

There are three approaches to get these insights: customer segmentation, path to purchase analysis (P2P), and price sensitivity measurement.  At boobook, these approaches are not exclusive but rather interconnected, each informing and shaping the other to optimise the product and pricing strategy. In this last article of our 360-pricing series, we'll explore these three methods to help you learn how to listen and understand your customers better so you can craft more effective pricing strategies.  

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Understanding your target audience and navigating the customer journey  

Customer segmentation is a powerful tool for businesses that want to identify and understand customer groups with diverse preferences and purchasing behaviours.    

We all know that the average customer does not exist. There are different types of customers in terms of age/gender, size of business, type of business, purchasing behaviour, as well as what drives their purchase behaviour, i.e. the why behind the behaviour. The latter is key to optimising the product offer and its pricing, as willingness to pay is very much linked to the type of customer you are.  

Tailoring your pricing strategy to segments can boost customer satisfaction, brand loyalty, acquisition, and, hence, business performance. A segmentation analysis also encompasses the evaluation of market segment size, providing a solid foundation for your upcoming business cases when introducing new products or potentially even sub-brands. This approach not only aids in understanding the potential reach of your offerings but also offers valuable insights into the most effective strategies for their promotion.  

There are several methods to identify customer segments. Most of them are related to analysing market research data, which collects data around the who, what and why of the (prospect) customer.  

You might have heard of methodologies such as k-means, hierarchical clustering, latent class and cluster ensemble. Each aims to find segments of people that differ in key characteristics. The most suitable methodology depends on the data as well as on the outcome. At boobook, we use the method that results in segments that are most actionable for the business question.

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Discover how Pernod Ricard decoded the travellers’ buying behaviour  

‍The path to purchase analysis covers the entire customer journey, from the moment a need is recognised to the point of product usage. The way we shop and buy today has become non-linear and is changing into omnichannel buying retail. As a result, throughout the customer journey, we now have various ways of shopping, which significantly impacts our decision-making process.    

Analysing this path is crucial to impact customer decisions and perceptions. By identifying different triggers and touchpoints along the journey, you can pinpoint the "moments of truth" most influential in leading to conversions. It's important to note that different customer segments may have distinct behaviours and are influenced by different touchpoints – and this is precisely where segmentation becomes valuable.  

Conducting a comprehensive study on the path-to-purchase can bring key insights, such as understanding the factors that trigger a customer's need, the specific channels and stores they prefer for buying, the duration of their decision-making process, and how to optimise in-store displays and online activations.    

Additionally, this approach can also shed light on how to create the most suitable pricing strategies. However, pricing may not always be the most critical element. It is crucial to understand what customers prioritise before price. Could it be recommendations from peers, friends and family? Perhaps it's catching the brand's advertisement while surfing online? By exploring these factors, you can tailor your approach, so your brand resonates with customers before they even consider the price.  

Want to learn more about the path to purchase? Learn more about how we helped Pernod Ricard UK understand their customers' path to purchase.  

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Analysing consumer behaviour through willingness to pay and price sensitivity  

Willingness to pay refers to how attractive a product or brand is at a specific price level. In other words, how many customers will consider your product given a certain price?  Price sensitivity goes one step further. It refers to how changes in prices impact consumer buying behaviour. So, how much will a price increase or decrease impact customer choice? The more price-sensitive your brand is, the more careful you have to be with price increases. Conversely, dropping the price of highly price-sensitive brands would be the way to go if you are after boosting volume. Though also realise that increasing again afterwards might not be easy. Temporary promotions could be a solution to this.  

Factors like brand image, brand equity, economic conditions, competition, brand loyalty, and ability to pay can affect consumers' price sensitivity. Researching and tracking price sensitivity, together with understanding brand image, helps businesses understand buying behaviour, adapt to market trends, optimise the price strategy and maintain a competitive edge.    

To measure price sensitivity, businesses can use quantitative consumer-research-based pricing methods like the Van Westendorf Price Sensitivity Meter, the Gabor-Granger Method, or a Conjoint Analysis. These methods provide insights into customer (pricing) preferences and help determine optimal pricing.  

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Discover how Center Parcs Europe optimised revenue management and increased profits

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Closing the loop  

Pricing is more than numbers; it's a language that communicates brand equity, product proposition value, quality, features, key customer groups, exclusivity, etc.  

Setting the right price for your product or service demands a strategic interplay of customer needs, perception and psychology, market dynamics and data analytics. By doing so, you can position yourself as a leader in your industry, resonate with customers, and drive sustainable growth.  

As we move away from traditional price-setting models, such as solely relying on cost-plus methods, embracing the dynamic realm of modern economics is essential. Your pricing strategy should be a continuous conversation with customers, exchanging value and expectations. Learning, adapting, and refining your pricing strategy through data-driven insights will help you stay ahead and build a thriving customer ecosystem.  

If you want to learn more about optimising your pricing, contact us at info@boobook.world!  

How can businesses achieve unparalleled growth and maximise profitability in today's competitive landscape? At boobook, we believe the answer lies in our data-powered strategic consulting, anchored firmly on four interconnected pillars: brand, product, pricing, and customer. We guide businesses toward excellence and sustainable growth by understanding and leveraging these fundamental elements.  

Determining the right price for a product can be daunting for many businesses. Often, pricing decisions are based solely on cost or intuition. However, at boobook, we know how important an informed, customer-first pricing strategy is to achieving business success. That's why we created the "Pricing 360°" series to guide you through the complexity of pricing strategy, one aspect at a time.

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In our previous article, we discussed the connection between brand and pricing. Today, we'll continue the "Pricing 360°" series with a second business pillar: the Product.  

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In this article, we will explore the relationship between pricing strategy and product features. We'll delve into the importance of understanding which product features are most valued by customers when setting your price. Adopting a data-driven approach allows you to develop optimal product configurations and corresponding pricing strategies that resonate with your target audience.

The influence of product features on pricing decisions

Setting the right price involves considering various factors, including external influences like macroeconomics, market demand, brand perception, competition, etc., as well as internal pressures such as production costs, company strategy, or corporate finances. While we will cover some of these factors in upcoming articles, for now it's absolutely crucial to acknowledge the pivotal role played by the range and the level of the offered product features in pricing decisions.  

Product characteristics such as design, durability, specific functionalities, product bundling possibility or other technical specs are vital elements to have evaluated by your prospects when determining the value customers assign to a specific product and what they are willing to pay for it, based on its specific product features combination.

It’s essential to avoid letting internal pressures dictate the product features or the price at which they are to be sold and instead focus on understanding and meeting your customers' real preferences, expectations, and willingness to pay. After all, what makes a product excellent is defined by the customer, not the product manager. This is the essence of a Value Based Pricing strategy, in which we strongly believe.

Get your pricing basics right first

Successfully defining an acceptable broad price range for your product(s) involves multiple factors, categorised as internal and external:  

Internal factors:  

1. Production costs: Understanding the costs involved in producing the product is essential for defining an appropriate price range that ensures profitability.  

2. Financial resources: A company's financial capabilities indirectly determine its pricing strategy. E.g. the level of promotional efforts at launch, the level of investments in product development that come with an impact on its final price, etc.

3. Positioning strategy: How the product is currently positioned in the market and its perceived value influence pricing decisions. A premium positioning strategy may warrant higher prices, while a value-for-money oriented positioning may require more competitive pricing.  

4. Pricing strategy: The chosen pricing strategy directly affects the product's final price.  
   Different methods, such as cost-based or value-based pricing, have distinct implications for profitability and market positioning.  

External factors affecting pricing decisions include e.g. the state of the (national) economy, market demand, level of competition or even seasonal influences.  

How to measure product needs  

Even though it’s important to have these internal and external aspects in mind, the key question you have to ask is what product or service features contribute the most to its value, and therefore, drive willingness to pay?  
Is it its design? Or maybe the width of the colour range you can choose from? Or could it be one of the more technical (and often underestimated) specs that really drives interest and willingness to pay? It is essential to be open to learning and understanding. These important nuances of what the customer thinks are crucial to a product and bring value and what are superfluous extras that they aren’t willing to pay more for.  
To further enhance your understanding of product-related customer insights, at boobook we use advanced methodologies such as conjoint analysis, Max Diff, or key driver analysis.  

Conjoint analysis is particularly useful for understanding the value of each individual product feature.  
In conjoint analysis, customers are shown all possible variations of product features/specs (levels) and are asked to choose which variation of features and specs-level they would be most likely to purchase, given a specific competitive and pricing situation.  
The different product variations, including competition (!), are presented on a simulated shelf to create a realistic shopping experience and the exercise must be done several times to ensure all possible competitive and pricing situations are tested. This is the only way to make robust, statistically significant, data-based insights afterwards.

Let’s take a look at the example with smartphone comparison. A product is characterised by its attributes and levels, which depend on the variations to be tested. A minimum of two attributes are required (for instance, price and brand) to create a design grid.

At boobook, we employ a scenario simulator for conducting key conjoint analysis. The simulator allows us to analyse the following:

• Price sensitivity of different product variations in a competitive market

• Estimates of volume, revenue and profit

• Evaluation of the value of various product features

• Potential cannibalisation effects

• Identification of the ideal product range

By analysing the data obtained, we can accurately measure the value of each product characteristic and identify which product variations customers are willing to pay more for. Combining these data-driven insights with our industry expertise, we enable businesses to make informed, strategic decisions that drive growth and profitability.

In conclusion

Conjoint method is a powerful tool that can address various business enquiries beyond pricing alone. Additionally, it can offer multiple simulation options.

However, it requires substantial set-up time, larger samples and is generally more costly compared to simpler methods. Conjoint analysis is best suited for examining the price sensitivity of multiple products, analysing the combined impact of price and product composition, and optimising price and promotional strategies.  

Curious to learn more? Check out our case study with Center Parcs to discover how we helped them identify which product features customers are willing to pay more for.  

Feel free to contact our team if you have any questions or want to learn more about data-driven strategic pricing. Stay tuned for our next article in the series: "Pricing 360°: Customer understanding as key ingredient of meaningful commercial strategies".

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How can businesses achieve unparalleled growth and maximize profitability in today's competitive landscape? At boobook, we believe the answer lies in our data-powered strategic consulting, anchored firmly on four interconnected pillars: brand, product, pricing, and customer/consumer. By understanding and leveraging these fundamental elements, we guide businesses toward excellence and sustainable growth.

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In the coming weeks, we're excited to share a series of articles focusing on these pivotal pillars, more specifically on how strategic price setting is driven by the other 3 pillars. This insight is crucial in an era where gaining a competitive edge is not just beneficial but necessary for survival and success. Understanding the intricate relationship between these pillars enables businesses to boost growth and ensure maximum profitability effectively.

Kicking off our "Pricing 360" series, we begin with a topic at the heart of product success or failure in the market: Brand perception. The way consumers perceive your brand has a profound impact on their purchasing decisions, a fact no business can afford to overlook. We will demonstrate how a deep, nuanced understanding of your brand, seen through the eyes of your consumers, can empower you to make pricing decisions that not only resonate with your target audience but also drive growth and success.

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Why having a clear view of your brand perception matters

The equilibrium between brand perception and pricing decisions is crucial for businesses striving for strategic growth and a stable market position. It involves a complex analysis of supply and demand economics combined with brand psychology. Contrary to common belief, a high price doesn't always signify premium value, and a lower price doesn't necessarily mean affordability. To truly enhance pricing strategies, understanding the signals your brand sends out in the market is essential.

Pricing strategy involves setting the optimal price for your products or services to maximise revenue or profitability and achieve business objectives - without pricing your brand/products out of the market or course. Pricing decisions will significantly impact sales volume, but also market positioning, and, indirectly, brand perception. The right pricing strategy can also help you attract (new) customers or maintain competitiveness.

So, what is the connection between these two essential components of your overall marketing strategy, and why should you align them? Brand understanding and aligning your pricing strategy with your desired brand positioning is essential because it helps you to create a consistent and coherent brand experience for your customers. When you achieve an accurate and positive customer brand perception, this, in turn, enhances their trust and loyalty, which is translated into increased sales and profitability.

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When companies benefit from brand understanding

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Here’s an overview of when and why companies will benefit from understanding how the market perceives their brand.    

• Linking pricing to brand positioning: Understanding how customers/consumers perceive your brand helps you identify and define your brand's unique position in the market. It allows you to understand how customers perceive your brand, and it enables you to identify the key differentiators that set your brand apart so you can create a compelling value proposition. This, in turn, influences pricing decisions. If your brand is perceived as offering unique benefits or solving specific customer problems, customers may be willing to pay a premium price. For example, if your brand is associated with high-quality and premium features, you can set a higher price point to reflect that perception. On the other hand, if your brand is positioned as affordable and value-driven, a lower price point may be more suitable.
• Launching a new product or service: Brand perception analysis is extremely valuable when developing or launching new products, product features, services or even (sub)-brands.
  It helps companies understand customers’ expectations, motivations, or feelings towards your brand. By mapping the target market's perception of your brand as well as your competitive landscape, companies can make strategic decisions to extend their offer purposefully and successfully.
  
• Rebranding/repositioning: When a company undergoes rebranding or decides to reposition its brand in the market, brand perception analysis becomes essential. It allows companies to assess their current brand identity and their brand DNA and identify gaps or opportunities for improvement. Companies can strategically plan and execute their rebranding efforts by understanding how the brand is currently perceived vs. how it should be perceived.

• Competitive analysis: Brand understanding is an excellent approach to conducting competitive analysis. By mapping competitors' perceptions and positioning, companies can identify opportunities for “the blind spots in the market” and build further on their strengths and weaknesses. This analysis provides the foundations for developing effective strategies to gain a competitive advantage and stand out in the market.

• Marketing and communication: Developing effective marketing and communication strategies isn’t the easiest task. However, with brand perception analysis, companies can better understand how their brand characteristics align with customer needs and expectations. By leveraging these insights, companies can create targeted marketing that resonates with their key audience, increasing brand awareness and customer engagement.

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How to measure and understand brand perception

There are different ways to capture the market's view of your brand and your competitors. Note that the view of competitor brands is critical in this exercise, as a brand is always perceived in comparison to other brands.  

One view might be to look at sales. Who sells most and least, especially how the volume changes when a brand is on promotion, as promos tend to be less necessary for more premium / high-quality brands. However, we know that sales (even promo sales) will only give a limited view of how brands are perceived.  

Another possibility is to collect brand perception views from the sales team, as they are often the closest to the market. However, these views might be biased towards specific customers or retailers.  

The best option is to talk directly to the consumers to get their view on how they perceive different brands—brands they either bought or are aware of. I.e. Which brands do they associate with high quality, reliability, trendy, premium, fun, innovative, mainstream, etc.? Alternatively, some of these perceptions can also be captured through social media analysis.  

Typically, the outcome of such an exercise is presented in a two-dimensional map called a "brand image map". It visually shows which characteristics brands are associated with and in which competitive space they sit, i.e., who the main competitors are from a brand image perspective.  

Ideally, a brand sits in white space, meaning competitors do not closely surround it and are away from the middle. The more a brand sits in the middle, the more its image is less distinct.  

Depending on the brand's goals, its desired brand image will differ. Value-driven brands strive to be considered premium and exclusive, while volume-driven brands will be closer to the mainstream.

In conclusion

Brand perception analysis is a vital tool for your branding and pricing strategy. When used effectively and complemented with other types of insights it can support businesses in strategic decision-making and help build strong brands.

Brand image analysis and pricing strategy are clearly intertwined in building a successful brand. By understanding the perception of your brand and its unique value proposition, i.e. your brand identity, you can effectively align your pricing strategy to maximise profitability and achieve your business objectives.  

Combining the insights gained from a brand image map with a landscaping exercise on current competitive pricing will further help you establish the optimal price (as in a price in line with the market) for your products or services, ensuring that you attract the right customers and drive long-term success.  

If you need to optimise your brand positioning and pricing strategy, get in touch! Our team is here to assist you in developing your ideal pricing strategy.

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