Cimigo can help you make better pricing decisions. The appropriate pricing approach and research solution will depend on the complexity of the decision.

Pricing decisions are important for determining:

Setting the right price for your brand’s perceived value

How do you know whether you are setting the right price for your product? The chart below is a favourite among CEOs and CFOs. It helps determine whether a brand is priced below or above the value consumers perceive it to offer.

Few brands are overpriced, but many are priced below their potential. A brand may be able to charge more when its products offer values and features that competitors cannot match. Many businesses do not fully recognise the brand equity they have built. Consequently, they miss potential revenue because their products are underpriced.

Cimigo can help you make better decisions by identifying whether your brand is priced above or below its perceived value. Cimigo’s brand value model compares brands within the same product category, identifies the factors that drive purchase behaviour and measures their relationship with current retail prices.

Some brands, such as brand 2 on the map, are appropriately priced for the value they provide to consumers. They therefore sit close to the value equivalence line.

Brand 1 sits in the advantage zone, to the right of the brand value equivalence line. This brand provides more value than consumers are paying for and therefore achieves considerable market share and sales volume. The brand owner should undertake further pricing research to understand the effect of a higher price on market share, volume and margin, and to identify the optimal price point. In this example, further research led to an increase in the price of brand 1. Its volume share fell slightly, but the manufacturer earned more profit.

Brands 3, 4, 5, 6 and 7 sit in the disadvantage zone, to the left of the brand value equivalence line. These brands provide consumers with less value than their prices suggest. They need to identify the factors that influence consumer choice and strengthen their brand value and brand equity. During this process, they should also review their pricing tactics. Several brands in this example have relied on promotions to clear inventory.

Simple price sensitivity assessment

Cimigo applies a simple price sensitivity meter model to determine the acceptable price range and the optimal price within it. Consumers are asked at which price they consider the brand being tested to be:

• Too expensive: At what price would you consider the product so expensive that you would not consider buying it?
• Too cheap: At what price would you consider the product so cheap that you would question its quality?
• Expensive: At what price would you consider the product to be becoming expensive, but would still consider buying it?
• A bargain: At what price would you consider the product a bargain, offering excellent value for money?

In this example, the optimal price is VND 24,000. The acceptable price range is from VND 19,923 to VND 29,000. Beyond this range, too much consumer demand is lost.

Complex price optimiser

A more advanced pricing solution is the Cimigo price optimiser. This approach uses discrete choice modelling to assess how different combinations of selected product attributes, such as brand, pack and price, are likely to affect sales volumes and values.

This approach is best suited to significant or high-risk decisions. It is the most reliable method Cimigo knows for estimating market share, short of undertaking a test market. It simulates actual purchase decisions by asking consumers to make holistic choices between products.

Discrete choice modelling is particularly well suited to portfolio management because numerous brands can be included in the experimental design. It captures interaction effects, making it possible to evaluate price sensitivity by brand. It also estimates volume and value share under different pricing scenarios.

The main benefits of the Cimigo price optimiser over other approaches are:

• Realistic stimuli using actual pack images and prices.
• Realistic consumer tasks that closely simulate purchase decisions through holistic product choices.
• A disguised task using randomisation and a statistically reliable experimental design. Respondents cannot easily determine the purpose of the research because they see no consistent relationship between prices and brands.
• Explicit estimates of market share. Unlike approaches based on rating scales or purchase-intent scores, the discrete choice model produces choice-based outputs.
• Interaction effects are captured, making it possible to evaluate price sensitivity by brand.

Brands, product variants and price ranges are used as inputs to generate choice tasks through a systematic factorial design. Each choice task presents images of brand variants with the relevant price levels displayed.

The variables are combined into different scenarios and presented to target consumers. As one consumer cannot review every scenario, different groups of consumers see different combinations. All consumers see the scenario containing the current product range at current prices. They are then asked to purchase the products their household would require for the next seven days, or another appropriate period.

Cimigo provides an easy-to-use Excel-based simulator that shows the modelled results for any pricing scenario within the scope of the design. Where margin and cost data have been provided to Cimigo, the simulator also includes profitability analysis. This allows profitability to be calculated under different pricing strategies.