We humans often live with a series of worries that keep us up at night. Among them is the cost of living. By this, we can mean everything from the most basic necessities like food and clothing to more superficial ones like entertainment and luxury. All the areas mentioned above are aspects we don’t want to overlook. Although there are marked differences in average spending in each area, we generally want to cover as many as our income allows.
This level of dissatisfaction is largely influenced by the price of products and services. This is a fundamental aspect of consumer decision-making. And as such, it’s a topic of interest for those who study our field. Given its relevance and its weight in business plans, this week we’ve listed four key areas of interest in market research related to understanding the cost of things.
Minimum Price. When people are going to buy something, they usually have a series of figures in mind that vary from person to person. At the lower end is the lowest price a person is willing to pay without questioning the quality or value proposition of the good. This value is determined by a series of factors that are quite variable and depend on the type of offer in question. It can be a very valuable piece of information because it indicates the lower limit at which certain categories can be handled.
Maximum price. On the opposite end, we have the highest price a person is willing to pay for something. When we hear the expression “it went out of the market,” we usually encounter an example of this variable. It’s just as delicate to approach or exceed the minimum as it is to exceed the maximum. No amount of emotion, quality, or value propositions you offer for a good will be worthwhile to consumers if you exceed the highest price they are willing to pay for it.
Optimal price. Although it might seem tempting to refer to the mean, median, and mode to define an optimal price for a product, this is far from reality in most cases. The most suitable price for a product is a very valuable figure that most brands want and need to know. Based on this data, successful business plans can be defined, allowing access to the most realistic profit margins in a given place and time.
Price Composition. Beyond the numbers, it’s also important to understand how people rationalize the price of things. One way to understand this process is through usage and attitude studies. These analyses, combined with the findings of cost research, allow researchers and decision-makers within companies to understand which factors weigh most heavily when assigning a reasonable price to a product.
Generally, the areas described above are addressed through price elasticity studies. As the name suggests, these studies provide a solid foundation for understanding the limits and equilibrium points within the realm of what people are willing to pay for what they need and want. Although they have a strong quantitative component, they also involve qualitative aspects that must be kept in mind at all times. This last point is crucial when we understand that rationalization always involves a degree of subjectivity.
At Acertiva, we have experience conducting research on the value of goods. Thanks to our more than two decades of experience in this field, we can connect you with a team of analysts and strategic suppliers in the leading countries of LATAM. When you’re facing a new challenge in understanding people and brands, you can contact us. Taking that first step can bring you closer to starting your next success story.
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