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Accurate pricing starts with asking the right questions.
Perhaps the simplest approach to primary pricing research is to demonstrate or describe a product or service and then baldly ask, "What would you be willing to pay for this?" An obvious problem with this is its open invitation to "lowball" the answer because it's impossible to hide the focus on price. Hearing such a question, many respondents immediately shift into bargaining mode and produce "opening" offers that aren't even remotely reflective of what their real-world behavior would be. The widespread use of this practice is an unfortunate testament to how often the realities of pricing research are ignored.
An equally simple but far more reliable direct question (known as a "buy-response" question) is simply, "Would you buy it?" This again would be asked after an initial demonstration or description of the product. The question can be construed as pricing research if the explanation happens to mention the price of the item or if the example happens to carry a price tag. From the researcher's point of view, we might be asking, "Would you buy it for $x?" but it's critically important not to call the respondent's attention to the price by actually using such phrasing. The price should be presented unobtrusively and matter-of-factly, so it's seen as just one of many features of the product.
If carefully executed, this question engenders no price-- related bias. If placed in the context of a full set of competitors, and phrased as "Which, if any, would you buy?" it also avoids the tendency to overstate willingness to buy the product we're researching.
To understand price sensitivity, we need to ask the question separately for at least two different prices. Monadic tests split the overall survey sample into several separate cells and ask a single buy-response question, with a different price in each cell. Well-executed monadic tests are the least biased way to measure price sensitivity in a survey context. No respondent ever knows that other prices are being tested or that price is the object of the research. With monadic tests researchers can be certain the differences seen from one price point to the next aren't a result of bias in the responses. The first half of...