Price Sensitivity Analysis – the optimal price point for a new product launch

The Challenge

A global FMCG company was looking to introduce a new premium range of products, targeting high value consumers. As part of the launch they needed to understand the optimum price that the luxury product could command relative to the existing product ranges.

The Analysis SolutionPrice sensitivity

We selected members of an online community panel to take part in a price sensitivity analysis study. The technique chosen was the Van Westendorp price sensitivity meter (PSM). We asked consumers to assess the price for the premium product range at which the product…

  • was so cheap that you would question its quality and therefore not consider using it
  • was a bargain and great value for money
  • started to get expensive, but would still consider buying it
  • became too expensive to the point where you would not consider buying it

From this we plotted the critical price preference points, providing the price parameters they should keep within, and the optimal price point.

The impact

Our analysis allowed the company to calculate the ideal price point for maximum market share. It also provided them with the optimal price range allowing for profit margins and revenue projections to be taken into account when making the final decision on price.

The analysis informed the pricing strategy for the product within each of the global markets, leading to a successful and highly profitable launch.