Determining a selling price for products or services is an endeavor that demands thorough consideration. Setting a price that is too high or too low will both impact negatively on a business. As such, businesses will do well to utilize price surveys in avoiding miscalculation of the most proper selling price.
To set a selling price is no straightforward task. A price that is too high will discourage potential customers. They will refuse to spend money on a product or service deemed too expensive. On the other hand, setting a price that is too low will not only diminish profit margin, but also present the risk of losing the target market. A premium product with unreasonably cheap price will incite doubts in potential customers; is this product really high in quality as advertised?
Hence it is crucial to determine selling price optimally. Conducting a price survey will aid in achieving this. Survey results will provide insights in finding and setting the best price to sell for.
Definition: What is a price survey?
As the name suggests, a price survey is a survey especially designed to learn and find the best price for a product or service. Results will give insight on the most proper and appropriate price. Additionally, an understanding of market conditions can also be gained.
Price surveys are highly important to do. Setting the best price can become a determining factor in a business’s failure or success. If the price is inappropriate, the performance of a business can be in jeopardy. However, if the most suitable price is found and set, a business will continue to grow.
Businesses should not underestimate the importance of price surveys. Every business should consider conducting it before launching products or services to the market.
Methods: How to conduct price surveys
In conducting price surveys, there are various methods that can be opted from. Business owners need to decide on a survey type most appropriate for the survey’s objective and the field of business. Below are some methods to consider.
1. Willingness-to-pay: Open-ended
A survey that directly questions respondents about their willingness to pay as consumers. This is asked after the product or service is presented. This type of survey is suitable for products or services with established substitutions or competitions in the market. This method will not perform very well for products or services that cannot be found yet in the market, or still only recently introduced.
2. Willingness-to-pay: Close-ended
Similar to the previous method, respondents are only asked about willingness to pay. However, they will be given close-ended options on the price range. For example, the survey will provide four to six options. This method of price survey is most appropriate for products or services that are very new to the market. As such, business owners can learn the proper price range which were previously not available for data reference.
3. Van Westendorp
A price survey that questions respondents after a product or survey presentation. There are four questions to ask. The results will then be analyzed to find the most proper price. The questions are:
- At what price would you think the product or service is too expensive so that you would not buy it?
- At what price would you think the product or service is too cheap so that you would feel the quality is not very good?
- At what price would you think the product or service is expensive, but you would still consider buying it?
- At what price would you think the product or service is priced at good value — a proper buy for your money?
4. Expected Cost: Open-ended
A price survey that asks respondents for their estimate or expectation towards the price of a product or service. Questions are given after a presentation that shows the quality and utility of the product. This method is most suitable for products or services not yet found in the market or only recently introduced.
5. Expected Cost: Close-ended
Similar to the open-ended type above, but respondents will be provided answer options, ranging from four to six options. This technique is appropriate for products or services which have a certain level of difficulty in setting the price. To add, there are not many previous cases available as points of reference.
Price can be an indicator of quality for a product or service. Businesses must determine the most proper selling price with the most appropriate method so that their target market will be accepting of the product and its price.