Pricing strategy

How do you ask how much people will pay without asking "how much you will pay?"

Alison Lewis CEO/Creative Director

June 28th, 2015

I have a questionnaire. 
We have a NEW PRODUCT in an old category. 

We need to figure out how much people will pay for it as a high end item in a fairly low cost category. It's hard to explain without giving all the details and FD doesn't allow details - so bare with me. 

1. tshirts normally cost $25 - $30
2. a programmable t-shirt that is driven by software with text, animations, and designs is a different story. The first shirts WILL be expensive if we decide to make them.  

How do we find out through our questionnaire how much cost people will tolerate for a new innovative item? We can't ask "how much will you pay?" because people never know prices for new things and always choose the cheap. 

Is there a question strategy that you can share that will help us determine price tolerance? 

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

June 28th, 2015

If you are trying to measure purchase intent (likelihood of buying) then technically changing any element of the consumer buying process (promotional channel/"offer"/design/brand treatment/etc) can impact the results. That is why CPG companies spend an enormous amount of money using expensive tests to find the same answer.

Given most of us don't and won't have access to such funds a couple of suggestions:

a) See if you can find a strategic channel partner, aka customer, who will do the testing for you as part of their own due diligence in selecting products. May seem far fetched but I have personally seen it happen up close.

b) Set up a website to promote the product, using a variety of prices, starting at the top end. You should garner some comments and if priced right and the product is right and message is right and...then some of these comments should be sufficiently strong to signal acceptance or "denial" of the proposed price

c) Set up a business facebook page with posts on the new product and higher end price and see what reactions are from FB ads that target the segment you think most likely to buy; you can lower 10% at a time to see if it impacts interest.

d) Check out sites that let you post an idea and gather feedback; Mount Dream is one, there are a few others.

e) Use a Kickstarter campaign to test consumer involvement (has been done before) 

f) Similar to strategic partner/.channel researching, see if they will let you showcase a couple in the store and see if people are willing to not only buy the few you have but be put on waiting list for next production run; chains won't do this but boutiques may

I am sure there are more options out there..good luck.

Jacob Anderson

June 29th, 2015

Alison, 
The problem with WTP (Willingness to Pay) surveys is that they (like previously mentioned) generate erroneous results that aren't useful in pricing a product because error and subjectivity are hard to parse from the results.  This is why choice based conjoint surveys are extremely useful in pricing products--you are able to take the survey results, run regressions, and determine the exact "utility" that each respondent gets from each attribute of your product--thereby giving you a pricepoint.  If you would like to discuss this more (and discuss how to do this), please let me know via pm.  Best of luck! Jake

David Crooke Serial entrepreneur and CTO

June 28th, 2015

Quick off the cuff response .... how much is an iWatch? You'll initially have a cool factor off the charts. Another trick is to try different pricing with different people, obviously not public but retail channels like ThinkGeek, and see what their reaction is. See if you can get a rap musician to license their name and wear it on stage :) Cheers Dave

Panagiota Bouboureka Production Planning Team Leader

June 29th, 2015

Hello,

In case that the questionnaire is the only way, try to find out how much they already spend in buying similar items.
It is misleading to ask how much they are willing to pay. You are not going to get real feedback.
Ask for FACTS. What they do, how often they buy T-shirts, how much time they spend for shopping, how much money do they actually spend. Then you should know how much they are willing to pay.
Good luck

Alison Lewis CEO/Creative Director

June 28th, 2015

Thank you everyone for your responses

Alison Lewis CEO/Creative Director

June 28th, 2015

These are great strategic answers. Thank You. Now I gotta figure out the design stuff. 

Kent Hamilton Lead UI / Angular Developer (AngularJS Architect) at AT&T - (eHire)

June 29th, 2015

You could consider putting the product up on Kickstarter.com and create a campaign to tell you demand based on price.

Alison Lewis CEO/Creative Director

June 28th, 2015

Thank you for the ideas. Will consider this for later after survey.

For example I'm asking what brands people buy, that tells me price tiers.

Specifically looking for questionnaire questions.  Our survey goes out this week. Other pricing tests can be done separately or marketing stuff after. 

Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

June 28th, 2015

Questionnaires like this tend to generate erroneous results.  This is actually the kind of thing kickstarter and indiegogo are good for.  Look for some way to offer people the chance to pledge actual dollar values that you will only collect if you get sufficient pledges.

Alternatively, run a reverse auction, sell N items, they go to the top N bidders, but all N pay the lowest price (bid by the Nth bidder above your reserve price)! 

This gives you a distribution of what people are willing to pay.  There's no incentive to underbid since only the top bidders get it, but no incentive to overbid because if you are bidder N you'll get charged for what you bid.