--- title: "Pricing Research: Willingness to Pay for New Products | antedote" description: "Pricing and willingness to pay research: how different offers and prices could affect demand, revenue and margin, with the assumptions behind each one." url: "https://antedote.com/what-we-do/pricing-research/" --- # Pricing research for the offer as well as the price. A clear view of what to charge, how to package the offer and what to put in it, with the assumptions behind every scenario set out. [View product and pricing case studies](https://antedote.com/explore-our-work/?work=Product%20and%20pricing#library) ## The whole offer. A drawing: a price rule from lower to higher prices, the range of prices tested bracketed in the middle and dashed at each edge, and an offer’s tag hung from one price inside the range, with the five parts of an offer on it. The price is one of five things your team is deciding, and it rarely moves on its own: the tiers, the terms and the rest of the range move with it, so we test them together. When the decision involves features, tiers or competing offers, a choice model can help, because people weigh the price against everything else in the offer: [Conjoint and choice modeling](https://antedote.com/what-we-do/conjoint-and-choice-modeling/). For other questions, a direct pricing study or a live test may be more useful. - What to charge - How to package it - What to include - How to sell it - How it fits your range ### Inside the range tested A model estimates how demand could change as the price moves, where it would come from, including your own range, which tiers buyers can tell apart, and revenue for each scenario. ### At its edges It can’t say what every customer will actually pay: stated willingness to pay runs high, so we calibrate its level. Nor can it forecast sales, which also depend on awareness, distribution, promotion and what competitors do next. ## Four methods, and where each one stops. A workable price range for something new ### Van Westendorp price sensitivity meter It can’t show demand at each price. A price point for a familiar product ### Gabor-Granger It can’t show which features justify the price. Tiers, bundles, features or a competitor’s move ### [Conjoint and choice modeling](https://antedote.com/what-we-do/conjoint-and-choice-modeling/) The level of what people would pay needs calibrating. A price rise, or two prices side by side ### A monadic test, one price per person It reads one price per group, so it needs a larger sample. One common design uses a direct method to set the range, then conjoint to build the tiers. Published tests agree that stated willingness to pay runs high: across 77 studies of consumer goods, by 21% on average (Schmidt and Bijmolt, 2020). A method that overstates it can still point to the right price (Miller and colleagues, 2011). So we use a stated price for its ranking and shape, and calibrate its level. 1. Jonas Schmidt and Tammo H. A. Bijmolt, “[Accurately measuring willingness to pay for consumer goods: a meta-analysis of the hypothetical bias](https://ideas.repec.org/a/spr/joamsc/v48y2020i3d10.1007_s11747-019-00666-6.html)”, Journal of the Academy of Marketing Science 48(3), 499 to 518, 2020. 2. Klaus M. Miller, Reto Hofstetter, Harley Krohmer, and Z. John Zhang, “[How Should Consumers’ Willingness to Pay Be Measured? An Empirical Comparison of State-of-the-Art Approaches](https://boris.unibe.ch/68450)”, Journal of Marketing Research 48(1), 172 to 184, 2011. ## What a premium rests on, and what a new way of selling could earn. What people say sets it apart ### [Understanding what justifies a premium in a staple food](https://antedote.com/explore-our-work/premium-pricing-evidence/) A food company wanted to understand premium in buyers’ own terms, in an everyday food. We surveyed recent category buyers on specific qualities, one by one, and on where the buying happens, and a digital ethnography went deeper with a group of them. What buyers say they value is one part of the case for a premium, and does not by itself show what they would pay. What people choose when the price moves ### [Deciding whether to offer workplace hardware as a service](https://antedote.com/explore-our-work/workplace-hardware-business-model/) A technology company had always sold its workplace equipment outright, and wanted to know whether businesses would take it as a service instead. We took the concepts, unbranded and unpriced, to the IT and office managers who would buy them. A trade-off pricing survey then tested package and price options, so revenue could be modeled across the tested price range. Two years later, the client’s own account of the program called the work the catalyst for opening up a new revenue stream. ## Before you commission pricing research. ### What is willingness to pay research? Research that estimates how customers would respond to different prices, offers and terms, under the conditions a survey or test sets up. It can’t measure what every customer will actually pay. It is one part of pricing research, which also looks at how the offer is built, and its answers are scenarios with their assumptions attached. ### Should we test prices in market, or ask people? Test in market when you can: a test with a control group shows what people do when the money is real. Surveys help before launch: for prices you wouldn’t risk live, for business buyers you can’t split into groups, and for understanding why a price works. ### Can you price a subscription or a new business model? Yes. We test the monthly price together with the tiers, the billing and the length of commitment, because buyers judge them as one offer. Interviews with buyers, and with the people who approve the purchase, help set options they would recognize before the trade-offs are measured. ### When should you not commission pricing research? When the price is fixed by contract, regulation or a channel partner; when no plausible result would change it; when a cheap, reversible live test would teach you more; or when the question is really about cost. In those cases, design the live test, or frame the question first. ## Pricing something new, or reviewing a price? Send us the offer as it stands and the choice your team has to make. We’ll suggest which parts of it to model, from the tiers to the terms, and what each scenario would assume. [Talk to us](https://antedote.com/talk-to-us/) · [hello@antedote.com](mailto:hello@antedote.com) A partner or director will reply.