Declining or flat sales are a nightmare for any retail business. On the face of it, it would be really hard to pin-point the exact reason behind declining sales without any form of retail metrics. As a rule of thumb, a good place to begin with declining or flat sales is to check on your prices.
At the end point of every successful sale is a customer who was willing to purchase your product for the price offered. It therefore follows, if customers are no longer buying your products, (assuming that nothing in the product offering changed) the product may no longer appeal to them as a fair value at that price point.
Arriving at this hypothesis is the easier part. The harder part is un-raveling the Whys behind your customers’ unwillingness to buy your products. Pricing research is a form of quantitative research that is used to measure the impact of price changes on product demand and also determine the best price for a new product.
Here are three price related questions to ask and more importantly, three ways market research can help you find the right answers and reverse the trend of declining sales.
What are my customers willing to pay for this product?
Ideally, it’s important to have a general understanding of what the market considers an acceptable price for products before you launch them into market. A market feasibility study will give you a pretty good idea behind market prices and what consumers are prepared to pay for certain products.
Given the ever changing dynamics of the business environment, pricing research can help unlock unseen gaps in market pricing strategies which in turn can help you exploit better prices for your products. The false assumption especially in price sensitive economies is that consumers are one-dimensional beings who are only interested in the lowest price.
Many growing brands have found that with the right value proposition, customers would actually be willing to pay a little more for value. Your job is therefore is to ensure your brand or product properly articulates this expression of value and prices accordingly.
What price will best achieve my market goal?
Pricing your products based on perceived customer value is the highest form of price optimization. It is also the most difficult to execute especially for small or growing players in trade and retail. A more practical approach to pricing would be to define a clear market or business goal and use this to guide your pricing strategy.
Having a clear goal in mind is not only highly motivating but also important in aligning all efforts towards the achievement of the stated goal. For example, your market goal could be to get customers to try out your new products. A price point that is lower than other products in the same category will help make it easier for customers to “experiment” or try out your new product. Pricing research can be useful in estimating the range of prices on offer in the market and what price point would be most ideal you’re your target customer without compromising on the value of the brand.
Who else is out there and how do my prices compare with other choices customers have?
Apart from understanding what other are charging in the market place, pricing research comes in handy in promptly identifying recent entrants into your sales universe, and how consumers are responding to their price offer. Pricing research methodologies not only deliver data on market prices but also consumer perception v/s price sensitivity, and price-volume optimization. With insights from pricing research, it’s easier to develop strategies to counter competition without necessarily resulting to price war tactics.