Using Qual to get better value from pricing research

Pricing research is a critical step in the product lifecycle. CMR’s CEO, George Ashford looks at the role that qualitative research can play in its delivery. Pricing research is a numbers game. So what role can qualitative research play?

CMR is increasingly asked to carry out pricing research. It’s an essential stage in the product lifecycle; identifying the optimal price for any new medical device is critical, just as adjusting the price of an existing product can be an important part of extending its life.
Generally when clients consider pricing research they are looking for robust data and approach us with quantitative techniques in mind. However, quant isn’t always the most appropriate way forward. The client may have a limited budget or the target audience may be hard to reach in significant numbers. But these aren’t the only reasons why we should consider alternatives. Sometimes there is a need to capture wider insights that won’t be covered in quant. It might also be necessary to lay the right foundations before getting to the point where statistically robust data can be generated.
This is where qualitative comes in. Susan Schwartz McDonald, President and CEO, National Analysts summarises the role of qual nicely:

in lieu of counting heads:

• When there aren’t enough heads to count
• When the ‘deal’ is too complex to capture as a set of discrete points

before you count heads:

• Am I testing the right prices?
• Am I testing the right product?
• Am I testing with the true decision-makers?
• What is the decision context? (e.g. do my buyers know prices?)

However, qualitative research can often be overlooked in an environment where we are quick to look for validation or quantification. Here at CMR we encourage clients to consider all of the options and we believe there are 2 areas where qual comes into its own:

1. Understanding the context:

Even in a familiar market there can be issues or complexities relating to the pricing process that need thought; understanding these issues can help avoid pitfalls later down the line and qualitative methodologies allow us to really dig down and comprehend them. These include:

• Understanding the perception of value: When it comes to value, qualitative research helps us investigate how the market conceptualises value, how it defines cost effectiveness and how it judges the trade-off between the two.

• Understanding the decision making process: Most clients have a fair idea of the process but more often than not there are factors that are hidden and make all the difference to sales. Qualitative research can help fully identify the stakeholders, their involvement, the communication between them and their respective influence (see our case study on how we mixed purchasers and anaesthetists to understand the purchasing process for patient warming devices).

• Testing the reality: Qual also gives us the chance to explore whether people mean what they say. The reality is that there is often a sizeable difference between what people say they are willing to pay versus what they will actually pay when push comes to shove. By using qual we can probe further and remove the subjectivity associated with self-prediction.

2. Maximising the effectiveness of a quant study

Qualitative also has a role in ensuring any quant study is as effective as possible. This can be done by:

• Gauging the setting: No matter how well formulated the research is, it simply won’t fully replicate the real world. Qualitative research will help investigate the context as a pre-cursor for quantitative studies. It enables us to answer questions such as how aware are purchasers of competitor pricing? Does supplying this information in a research setting in order to mimic the real world over educate them and skew the pricing context?

• Defining thresholds for quantitative studies:  In terms of defining thresholds for quant, it helps us understand what the target audience feels is expensive, what it feels is cheap and the reasons behind this. Go into a quant study without understanding that and you leave yourself exposed to missing the mark.

• Formatting questions correctly: The way in which questions are framed can have a significant impact on the responses received in any form of study. Using qualitative research to test the best format for quant questions can help to ensure that they are understood and elicit higher quality responses.

• Ensuring stimuli are effective: It’s not always easy for purchasers to accurately assess the value of a concept, particularly in an online survey where they can’t physically handle/touch it. In new product development we need to be cautious about what supporting data or messages are available as the way in which this is communicated can have a significant impact on pricing perceptions. Spending time qualitatively refining the product profile among clinicians and purchasers ensures we can do the product justice when we come to the quant study.

There are a range of techniques that we at CMR use in relation to qualitative pricing research (e.g. Gabor Granger, Van Westendorp) and just like quant, these have their limitations. We’d recommend a mixture of quant and qual initial qualitative exploration to set up the parameters and context for a quant study (e.g. conjoint). Take a look at this case study to see what we could do to help you.