Generally, the optimum price is one that your customers are willing to pay, without it affecting your profits. Before a product is introduced, a company uses market research to establish the needs of the targeted consumers. Setting a price that is too high or too low will - at best - limit your business growth. An initial rejection of a new product in a market research study may shortly become an enthusiastic embrace as attitudes change. Change: Remember that the world changes constantly. There are lots of product-pricing strategies out there based on the study of human psychology. For example, if the cost of the product is $100 and your selling price is $140, the markup would be $40. The technique is partly based on earlier research … Most market research can be done online. Hence market research cannot be expected to give definitive and direct answers to new product questions; rather it should be used to provide a backdrop of understanding to the needs and unmet needs of the market. Product testing can be as simple as having a research participant test a single product (monadic testing) and fill out a survey on the “key performance indicators” like likelihood of purchase. Ending your price with a 9 or a 5, for example, is called “Charm Pricing.” Millions of businesses have used charm pricing to price their products, and it's proven to increase sales.. Or there’s “The Rule of 100,” a fantastic psychological hack to maximize the perceived magnitude … Your customer’s price sensitivity is the degree to which price determines his or her inclination to buy your product or service. To price your time, set an hourly rate you want to earn from your business, and then divide that by how many products you can make in that time. The price you charge for your product or service is one of the most important business decisions you make. In this paper we present a new technique for the measurement. Research can help you find the optimum price for your products. To take an accurate measure of the benefits a product offers—and thereby find its true price ceiling—market research must be designed to elicit more open-ended feedback than can usually be acquired through multiple-choice questionnaires or trade-off techniques, both of which can limit responses. Van Westendorp, P (1976) "NSS-Price Sensitivity Meter (PSM)- A new approach to study consumer perception of price." Typically, price sensitivity is measured by price elasticity of demand, i.e. Proceedings of the ESOMAR Congress. At worst, it could cause serious problems for your sales and cash flow. how does a % change in price affect the quantity demanded by your customers.. There are several different reasons that companies use market research, and these reasons change with the stage that the product a company is selling is in. To set a sustainable price, make sure to incorporate the cost of your time as a variable product cost. Or, it can go into the various sensory qualities (appearance, flavour, etc) and make use of sophisticated video recording and observational techniques. By looking at changes in restaurant food pricing during the period of 1978–2015, MacDonald and Nilsson find that prices rose by just 0.36 percent for every 10 percent increase in the minimum wage, which is only about half the size reported in previous studies.