The cost of your product or service plays a huge role in determining whether the consumers buy it or not. People can only operate within their budget, and if your price goes beyond it, there are high chances that they won’t buy it. In the same vein, some people base the quality of the product on the price tag. Therefore, low prices may often lead to your product being mistaken for a substandard product. That’s why you need to listen to what they have to say when pricing your products. How? Let’s discuss how to choose better pricing solutions with conjoint analysis.
Determining What to Charge using Conjoint Analysis
Since price is one of the attributes of a product and service and has a huge impact on the buying decision of consumers, conjoint analysis can be an ideal way of determining the best price. After all, it is no secret that the price is often a trade-off in real life as people make various purchases. The analysis will help your business determine the willingness to pay many consumers. In other cases, it determines which features will be free and the ones that will fall under paid categories. Let’s look at the two aspects in detail.
How to analyze the willingness to pay using Conjoint Analysis
Conjoint analysis helps in the estimation of the values of every attribute or feature of a particular product. Ensure that you include price as a feature while using it as the “exchange rate.” Once you collect the data, transform the value of your product into an amount and use dollars. It will help you determine the level of an attribute that various customers are willing to pay for more than the other.
Eventually, you will have a list of the products or services worth paying for yet won’t pay even a single dime on others. After that, come up with various pricing plans based on the findings. How do you ensure that every pricing plan remains relevant to at least a portion of your consumers? After conducting a conjoint analysis, you will identify the features worth being placed behind a paywall and the ones that are better free. This is a common practice among companies offering software.
For instance, are people willing to buy a 1 litre or two-liter package if selling beverages? What role is the price playing in determining the popular package? Is there something that the company can do to change the narrative? What about changing the pricing model to some extent? Those are some things you can identify using conjoint analysis.
It is evident that conjoint analysis can be a great strategy when finding better pricing solutions. It gives you an idea of the various features affecting how much your customers are willing to pay for the various features of your products and services. For the features, they would be willing to pay for, include them in a paid plan. As for the rest, make them free for the time being. They probably don’t value them since they don’t understand their importance. Once they do, conduct another conjoint analysis and change the pricing accordingly.