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Pricing Strategy

How much should you charge for your products or services?

Beacon's experts will create a targeted study according to the questions that you want answered. The sections below include examples of questions asked by our clients and the insights we provided to help them make sound business decisions.

How much are each of your product features – or combinations of features – worth to your customers?

CLIENT NEED To determine whether the client could or should raise its prices to cover the cost of additional new services.
BACKGROUND A publishing company was altering its product offering to allow for different product bundling options, and wanted to price these accordingly.

Beacon surveyed the company's current and former subscribers and customers to determine the optimum price and product options. We used choice-based conjoint analysis for this study.

HOW WE HELPED Beacon's research results showed the client that there was incremental value in the various iterations of new product options, but that the level of demand elasticity was so substantial that any price increases would ultimately be self-defeating and produce client defections.

CLIENT NEED To identify the value of various bundles of product features and functionality to potential customers.
BACKGROUND An IT software firm was moving into the remote storage and archiving market sector, but was unsure about its brand presence in the new market space, the optimal service options, and how to price these service bundles in line with their perceived value.
BEACON'S RESEARCH Beacon Technology Partners carried out a survey of senior IT managers open to using a 3rd party for offsite data storage and archiving solutions. The study included various product options and price levels. Tools that we used in this research included choice-based conjoint analysis.
HOW WE HELPED Beacon displayed the incremental value – expressed in dollars – of each individual service, plus the overall potential prices for various packaged options or collections of services. Interestingly, respondents chose the higher prices, rather than the lowest price level administered in the test, showing that IT managers would be concerned about relying on low cost solutions for their mission-critical digital record archiving. The client therefore now had concrete evidence to make decisions on price setting.

What range of prices is your market willing to consider for your product?

CLIENT NEED To find out if customers would really be willing to spend more for various product options.
BACKGROUND A manufacturer of consumer electronic devices wanted to gauge potential interest in its new range of cell phone products with special image projection capabilities.
BEACON'S RESEARCH Beacon used in-person focus groups and employed experimental design principles to create a laboratory-like setting across multiple sessions with randomized treatments and exposure to various product elements.
HOW WE HELPED The focus groups ratified the concept of image projection using a cell phone, but also gleaned the value consumers placed on the features of this enhanced cell phone. Varying price levels for different feature combinations and exposure to differing promotional stimuli were also elicited. The focus groups were especially useful for planning point-of-sale (POS) advertising and retail displays.

CLIENT NEED To evaluate the risk of adding new "bare bones" products and services to the current mix offered – and to assess how much could be charged for these new "bare bones" products.
BACKGROUND An IT services firm was examining the strategic advisability of offering two distinct variations of its product offering: 1) a "lite" version of its current service package, but with careful examination of the cannibalization potential, and 2) a "hot site" for smaller firms unable to create their own redundant-IT infrastructure – but with no clear designation on pricing levels.

Beacon made a study of 300 IT managers involved in data storage, examining demand for the "lite" product offering. For this, we used a choice-based conjoint approach. Interest in the "hot site" initiative was tested utilizing a van Westendorp pricing analysis.

HOW WE HELPED Beacon's analysis showed the prices at which the company could offer the "lite" version without unduly risking cannibalization with their full solution, as well as the optimized price for both options which could maximize potential revenue. Potential pricing for the "hot site" differed markedly not only by company size but also whether customers saw the offering as an add-on to what they already had vs. a complete replacement.

How price-sensitive are your various customer segments?

CLIENT NEED To identify which customer segments were most sensitive to price increases or decreases.
BACKGROUND A manufacturer of storage devices was planning to introduce encryption modules that could be easily incorporated into RAID-based and tape-based storage architectures on an OEM or after-market basis, but wanted to know the overall demand for the hardware and the management services that would be offered alongside the modules.

Beacon's survey of IT managers involved in purchasing storage security solutions included data that was weighted to reflect the actual universe of potential customers in North America. Our study results employed Gabor-Granger pricing analysis to show demand at various prices and also net returns.

HOW WE HELPED Beacon provided information to the client on the demand function for various price levels and what net returns could be realized. Differing levels of demand elasticity were noted for groups of potential customers, including respondents from "targeted" industry segments, as well as those who were and weren't interested in the attendant managed service offering.

Is it more profitable for you to enter a market with your own branded product, via an ingredient brand or as an OEM for another brand?

CLIENT NEED To assess the best "go to market" strategy for the client's new product - go it alone or partner with another firm.
BACKGROUND A test equipment manufacturer developed a new product in collaboration with a rival firm for a marketplace in which the rival was well-known. The test equipment manufacturer needed to understand the premium that could be realized under a co-branding strategy vs. an ingredient-branding approach.

Beacon's in-person focus groups with targeted end-user segments included examining topics related to product evaluation, branding, pricing and messaging. To glean more insight, the groups also included the sharing of different stimuli with different pre-selected individuals in each session.

HOW WE HELPED The product would be a success, the Beacon groups revealed, but they also showed that an ingredient-brand would earn a greater premium than would a co-branding strategy. The groups also elicited views on just how such a brand strategy could be most effectively deployed.

CLIENT NEED To assess the value of selling a product under the client's own brand vs. a private label initiative
BACKGROUND An industrial control manufacturer was developing a motor control monitoring module. Questions pervaded, however – what support should be offered as part of the package? How should it be priced? What brand should it carry?

Beacon conducted a choice-based conjoint or trade-off analysis to learn more about interest in a new product among targeted customers, as well as the branding that they had considered.

HOW WE HELPED Beacon showed that the client's brand was operating under a severe disadvantage and that a more profitable OEM strategy – the same product offered by a more prominent manufacturer – would increase possible prices by 50% or more.

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