A Better Way to do Pricing and Preference Research

Doing pricing analysis is among the trickier market research activities. It's very tricky to identify the 'optimal' pricing for a product. Simply asking people, "How much would you pay for this?" just doesn't work. The answer too often is "nothing" or - better but still not great - an amount that isn't an honest reflection of what their choice would be in the real situation.

One tool that researchers use to do pricing analysis in a more effective way is conjoint analysis. In a conjoint analysis, study participants are given a number of scenarios and are asked to rank their preferences. None of the scenarios are 'optimal' (say, the fastest car with the best reliability at the cheapest price). By evaluating how participants make trade-offs among the options that are given to them , researchers can determine what matters most to them (is it price, reliability, aesthetics, or some other feature ) it provides research e analysis with this is conjoint analysis. It's a cool tool that gives people a number of options and gets at the real way that consumers back decisions - based on trade offs.

There's another cool tool on the market called Maximum Difference Scaling. There's a great video from Harvard Business Review at

http://hbr.harvardbusiness.org/web/tools/2009/03/what-do-customers-really-want that explains what it is and how it works. If you're doing pricing research, check it out!