Voices: the CMB Blog

When Redbox, the movie rental kiosk company, raised their prices 25%, many analysts saw the move as desperate—predicting significant losses to market share in 2015 and 2016. At the same time, the company’s stock rose, with investors expecting customers to adapt to the higher prices. So who’s right?  I have some predictions, but we’ll leave those for another blog. Today, I want to write about some of the fundamental questions companies need to ask before they embark on a new pricing strategy.

If you think pricing isn’t all that important, here’s something to ponder: a 1% increase in prices of Wal-Mart products ($10 on a $1,000 TV), assuming a demand around existing levels, would increase operating profits by about 20% and add about $48 billion to Wal-Mart’s market cap.

Companies rarely approach pricing from a “value to customers” perspective. Even when they do, they don’t fully exploit the potential of value based pricing for fear of backlash. For decades, airlines have understood the importance of pricing, and, in my opinion, outside of CPG companies (and some new tech entrants) have best implemented and used pricing as a tool for competitive advantage.

For any pricing strategy to succeed, you need a well thought out plan. Answer the following questions to get started:

1. Who is the customer?

a. While you might have customers you've served for a long time, you still need to ask yourself how people interact with your products. Are there touch points you’re currently ignoring? Are your current customers the ones you should be serving?

• How can you answer these questions? Start by observing and getting these discussions going.
• When’s the last time you did a Segmentation? If it’s been more than 2-3 years, that’s another potential starting place.

2. What are the closest competitive offerings?

3. What is the monetary value of your product to the market?

a. Think of this in terms of the savings your product could offer customers over competitor products. This doesn’t automatically mean a lower price. A higher priced product could offer savings in multiple forms—a few examples include a lower cost of ownership, lower maintenance costs, and peace of mind. 

4. How are the different product features valued?

a. To figure this out, you can conduct choice exercises that replicate the market behavior of consumers. A good choice exercise must include, at a minimum, products that together control 60% of the market. Here’s another tip: make sure you also include future offerings and even some potentially ridiculous products you would never offer. 

5. Based on the above steps, are there different customer segments? If yes, what are the optimal product and pricing tactics for each segment?

a. You also need to consider whether there are psychological price barriers for different customer segments that must be kept in mind.

Answering the above questions is a battle half won. For pricing to be truly successful, you need to go beyond coming up with tactics. Answering the next set of questions can be the difference between a good strategy and a great strategy.

1. What is the messaging and communication strategy for...?

a. Product value?

b. Pricing?

2. Is the above pricing strategy feasible? Think:

a. How crowded is the marketplace?

b. Is there a clear market leader?

c. How mature is the market?

d. Is your organization trying to maximize profits, gain a foothold in the market, or maximize share?

3. What is the action plan to react to competitive moves in the marketplace?

4. How do you plan on approaching end-of-life pricing for your products and services?

As you can see, building a thorough pricing strategy is not an easy task. At CMB and South Street Strategy Group, we take our pricing research seriously. We're experts at not only conducting research but also helping clients with rollout plans, and we have a lot of experience guiding clients from a wide range of industries through these steps.

If you’re interested in reading about this further, I’d highly recommend Thomas Nagle’s The Strategy and Tactics of Pricing and Rafi Mohammed’s The 1% Windfall. And, of course, I’d be more than happy to chat with you about pricing structures in the comments! 

Abe is a Senior Project Manager, strategy junkie, and CrossFit enthusiast. He's recently taken up snowboarding so watch out if you're headed to the slopes. 

We’ve all done it . . . made New Year’s resolutions that this will finally be the year to eat healthier, to go on that dream trip to Europe, or to get more organized. Our hopes are high and our intentions are good—and yet, the end of the New Year comes around and our resolutions remain undone.For market researchers and businesses, the New Year puts a focus on planning for new research and evaluating research already in place, including that tracker that’s important to continue but, over time, has turned stale and “tired.” You continue to track, but it isn’t providing the same level of value or insights as it has in the past. It needs to be rejuvenated. 

At Chadwick Martin Bailey, we believe that if your tracker isn’t helping your company grow, stay ahead of the competition, or set strategic priorities, you need to make a change. If one of your resolutions for 2015 is to refresh your tired tracker, here are some things that will help you achieve that goal this year:  

• Evaluate your tracker with a fresh eye to make sure you’re asking the right questions, in the right way, to generate insights that support your business decisions for 2015 and the years to come. Even though most of us shudder at the thought of touching a tracker in any way (how many times have you said the words “but what impact will that have on trending?!”), today’s pace of change in business is remarkable. The landscape that currently exists for your business may be very far from what it was when your tracker began. 

Make an honest assessment of the questions you ask and how you ask them. Would you be gaining deeper, more actionable insights if you made a change? Then, make careful decisions about trade-offs, specifically between improving usefulness vs. losing trendability. If you deem a change necessary, create a transition plan. Conduct a parallel pilot test of the change when possible. Have discussions with your stakeholders to ensure everyone understands the trade-offs that will be made.

• Focus on the strategic and tactical decisions the business needs to make from this tracking research. Have conversations with your stakeholders and information users. Find out which results from the existing tracker are actively used and which results are never touched. 
  • If you find some results are no longer used or cannot provide insights to drive action, consider cutting the questions. 
  • If you find new information needs have arisen that require tracking, add questions that will address them. For any new needs that don’t need to be tracked over time, consider incorporating a “rotating” module into your tracker (a short section of questions open to change wave-to-wave). This helps leverage the tracker to address specific related questions without undergoing the cost and time of a separate research effort. 

What information does your business currently need in order to take action? Knowing the answer to this question and keeping your tracker current to address those needs elevates its usefulness to drive action and decision-making.

• Ensure your tracker deliverables are telling a story that is relevant to each audience. You should be delivering the right insights to the right stakeholders, and these insights should be in a form that allows them to act. This means no data overload. It’s hard to identify insights when they sit somewhere within a 100 page deck. It’s harder to digest business-changing recommendations when you only have 20 minutes on the calendar to review them before the stakeholders are off to their next meeting. It’s even harder for your stakeholders to decide what type of action they should take when the information is delivered in a “one size fits all” format. 

It’s important to think about how to customize your tracker deliverables in a succinct way that readily speaks to each stakeholder’s role and what decisions they need to make, so you don’t fall into the trap of just delivering updates on the same set of metrics wave after wave.

Topline reports may work well for certain audiences while scorecards and dashboards might work better for others. Don’t be afraid to deliver results creatively and in a visually-compelling format. At CMB, we often include dynamic deliverables such as easy-to-digest infographics, one-pagers, posters, and video/motion graphics. These dynamic deliverables are all focused on communicating the story (not the data!) in a way that is relevant and useful for enabling action across our clients’ organizations. 

So if you’ve made a commitment that this year will finally be the year that you rejuvenate that tired tracker, consider the areas above when setting it up to support confident, strategic decision-making in 2015 and beyond.

Wendy is the Account Director of CMB’s Financial Services practice. She has two children, and she loves Cape Cod, the Boston Celtics, and refreshing tired trackers. Her 2015 New Year’s resolution is to finally make this the year she actually keeps her resolution about kicking her daily Diet Coke habit.

If you work in marketing or market research, chances are you’re becoming more and more familiar with conjoint analysis: a powerful research technique used to predict customer decision-making relative to a product or service. We love conjoint analysis at CMB, and it’s easy to see why. When conducted well, a conjoint study provides results that make researchers, marketers, and executives happy. These results:

• Are statistically robust
• Are flexible and realistic
• Describe complex decision-making
• Are easy to explain and understand

If you need a quick introduction or a refresher on conjoint analysis, I recommend Sawtooth Software’s excellent video, which can be found here.For these reasons conjoint analysis is one of the premiere tools in our analytical toolkit. However, as with any analytical approach, conjoint analysis should be applied thoughtfully to realize maximum benefits. Below, I describe three of the most common pitfalls related to conjoint analysis and tips on how to avoid them.

Pitfall #1: Rushing the Design

This is the most common pitfall, but it’s also be the easiest one to avoid. As anyone who has conducted a conjoint study knows, coming up with the right design takes time. When planning the schedule for a conjoint analysis study, make sure to leave time for the following steps:

• Identify your business objective, and work to identify the research questions (and conjoint design) that will best address that objective.
• Brainstorm a full list of product features that you’d like to test. Collaborate with coworkers from various areas of your organization—including marketing, sales, pricing, and engineering as well as the final decision-makers—to make sure your list is comprehensive and up-to-date.
  • You may also want to plan for qualitative research (e.g., focus groups) at this stage, particularly if you’re looking to test new products or product features. Qualitative research can prioritize what features to test and help to translate “product-speak” into language that customers find clear and meaningful.
  • If you’re looking to model customer choices among a set of competitive products, collect information about your competitors’ products and pricing.
  • Once all the information above is collected, budget time to translate your list of product features into a conjoint design. While conjoint analysis can handle complex product configurations, there’s often work to be done to ensure the final design (a) captures the features you want to measure, (b) will return statistically meaningful results, and (c) won’t be overly long or confusing for respondents.
  • Finally, budget time to review the final design. Have you captured everything you needed to capture?  Will this make sense to your customers and/or prospective customers? If not, you may need to go back and update the design. Make sure you’ve budgeted for this as well.

Pitfall #2: Overusing Prohibitions

Most conjoint studies typically involve a conversation about prohibitions—rules about what features can be shown under certain circumstances. For example:

While it’s tempting to add prohibitions to your design to make the options shown to respondents more closely resemble the options available in the market, overusing prohibitions can have two big negative effects:

1. Loss of precision when estimating the value of different features for respondents.
2. Loss of flexibility for market simulations.

The first of these effects can typically be identified in the design phase and fixed by reducing the number of prohibitions included in a model. The second is potentially more damaging as it usually becomes an issue after the research has already been conducted. For example:

In general, it is best to be extremely conservative about using prohibitions—use them sparingly and avoid them where possible. 

Pitfall #3: Not Taking Advantage of the Simulator

While the first two pitfalls are focused on conjoint design, the final pitfall is about the application of conjoint results. Once the data from the conjoint analysis has been analyzed, it can be used to stimulate virtually any combination of the features tested and predict the impact that different combinations will have on customer decision-making. . .which is just one of the reasons conjoint analysis is such a valuable tool. All of that predictive power can be distilled into a conjoint simulator that anyone—from researchers to marketers to C-suite executives—can use and interpret.

At CMB, the clients I’ve seen benefit most from conjoint analysis are the clients that take full advantage of the simulators we deliver, rather than simply relying on the scenarios created for reporting. Once you receive a conjoint simulator, I recommend the following:

1. Distribute copies of the simulator to all key stakeholders.
2. Have the simulator available when presenting the results of your study, and budget time in the meeting to run “what-if” scenarios then and there. This can allow you to leverage the knowledge in the room in real time, potentially leading to practical and informed conclusions.
3. Continue to use your simulator to support decision-making even after the study is complete, using new information to inform the simulations you run. A well-designed conjoint study will continue to have value long after your project closes.

Liz is a member of the Analytics Team at CMB, and she can’t wait to hear your research questions!

Our blog is special. We don’t just have one or two bloggers. All of our employees contribute to our blog, which produces a wide array of perspectives on all aspects of market research including analytics, loyalty, segmentation, and more! This is the perfect time of year to reflect, so before we embark on 2015, let’s take a look at a few of our favorite blogs from 2014:

1. Keeping brand trackers fresh can often be challenging. Caitlin Dailey delves into how we keep our trackers interesting in a blog entitled “Keeping Trackers Fresh: Finding that ‘Special Something.'”

2. Here’s another one of my favorite things about our blog: we’re able to take aspects of popular culture and talk about how it connects back to market research. In a blog entitled “A Perfect Match? Tinder and Mobile Ethnographies,” our Director of Qualitative Research, Anne Hooper, does just that by relating popular dating app Tinder to mobile ethnographies.

3. A Colorado Symphony concert show series was sponsored by the cannabis industry? This is just one of the odd sponsorships that Kate Zilla-Bâ dives into in her blog post entitled “Sponsorship Advertising: Odd Couples That May Succeed.”

4. This year, we had the privilege of being honored as one of the “Top 100 Women Led Businesses in Massachusetts.” Take a look at what our President and CEO had to say about the honor in this blog post.

5. We do a variety of events in the community throughout the year, but our favorite event is the annual Light the Night Walk for the Leukemia and Lymphoma Society (LLS). In this blog post, Catherine Shannon talks about how our involvement started.

6. Jessica Chavez segments the parents at the tumble gym and discusses how to make segmentation studies relevant, meaningful, and actionable in this blog post.

Is there anything you’d like us to cover in 2015? Tell us in the comments, and we look forward to talking with you next year!

Kirsten Clark is a Marketing Associate at CMB who’s also pursuing a M.A. in Integrated Marketing Communications at Emerson College. She looks forward to ringing in the New Year by watching all 6 Star Wars movies back-to-back. 

Since we recently attended the New England Market Research Association’s (NEMRA) Fall Conference, “Advancing Market Research: Challenging the Norm,” we wanted to share our five key takeaways:1. Don’t forget the importance of non-conscious decision-making. 70% of the decisions we make are non-conscious, meaning our brains automatically activate associations outside of our awareness and control. This is often described as "System 1" thinking (coined by Daniel Kahneman), which are our fast, emotional, and more instinctive thoughts. Non-conscious decision-making is often used. . .

• When making low-involvement or low risk decisions 
• In quick evaluations
• In impulse purchases
• To efficiently include or exclude brands from our consideration set

We need to be looking for opportunities to use methodology inclusive of the non-conscious. It is particularly important to understand its impact on brand evaluations, given that. . .

2. Brands are non-conscious creators of reality. We must strive to understand a brand’s stereotype. There are many similarities between the construction of stereotypes and how we use or think of brands. Both stereotype and brand associations are largely mental representations that are socially communicated through media and culture and encountered passively over time. They are automatically activated by ‘System 1’ thinking and mediated by conscious thoughts or endorsed beliefs. In order to understand a consumer experience, we must aim to understand the brand’s stereotype. We choose to engage with brands in the same ways we choose to engage with anything else. We gravitate towards people, places, and brands that relate to some aspect of ourselves, and this association is most often done unconsciously. For example, we both do not painstakingly think about which brand of detergent to use—we always reach for All. Even at a more granular level, All has about 10 types of detergent options—Fresh Rain, Oxi Booster, Regular, Baby, and so forth—and if we seriously took the time to narrow down brands and options rather than using a heuristic to help make the decision, we’d never have clean clothes again. 

3. The power of brand identity. The relationship between brand identity and the way we interact with brand stereotypes can have powerful consequences on behavior, mainly because, as Charles Swann said during his talk, “the ability for a brand to impact our identity is the biggest factor in a brand’s social presence.” We use brands to define who we are and who we want to be perceived as. For example, just think about the clothing you wear and the car you own. Many of the choices we make are influenced by how we interact with the brands around us—the brands that drive their own identity and stereotypes for better or for worse. This all comes down to one key theme—social identity—and the ability for a brand to help drive who we are. The age old saying “consumers own the brand” is truer now than it has ever been. Additionally, there is now a collaborative relationship between the brand and consumer—consumers define what a brand should be and brands become the stereotype that later defines consumers’ identity.

4. Storytelling. Brands are a large part of consumer identity, and, as such, there has always been a deep need to bring insights—research and otherwise—to life and to develop a face of the consumer. At this conference, a researcher from a national company pointed out that because consumers are dynamic, the need for powerful storytelling in research and branding is pivotal for understanding how these consumers behave and move through the purchase funnel. What drives these consumers? What makes the most loyal customers so loyal? Why do we lose customers? Deep insights into consumer behavior can be derived from both quantitative and qualitative research—it’s a matter of presenting the story in a way that humanizes consumers and personifies who a brand is trying to reach. 

5. So what? Throughout the NEMRA conference, there was a plethora of information on non-conscious decision making, brand identity, and socialization of research. The theme that ended every presentation was “So what?” That’s the infamous line we’ve all heard 100 times from various professors, colleagues, and our own minds. So what? It all came down to making any research we do actionable so that brands can adapt to a changing consumer environment. As researchers, we need to think about the behaviors and experiences consumers have and allow those insights to inform the questions we ask and the hypotheses we develop. Doing this will not only lead to more effective branding, advertising, and marketing but to happy consumers as well.

Alyse is a Senior Associate Researcher on the FIH/RTE practice. She is fascinated by Behavioral Economics, Psychology, and what makes people tick.

Hilary is a Project Manager at CMB. Her New Year’s resolutions include how to activate “System 1” thinking about hitting the gym in 2015.     

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