Monadic Price Testing: “Shh, It’s All About Price”
Posted by Vovici Blog on Mon, Feb 14, 2011
One of the concerns of traditional price tests in surveys is that they are not natural exercises for respondents, who immediately focus in on price. In the real world, consumers make constant trade-offs between price, functionality and brand; price may or may not be paramount. In research methods like Willingness to Pay and the Van Westendorp Price Sensitivity Meter, price is first and foremost.
One approach that hides from respondents the fact that it is about pricing is monadic price testing, where monadic refers to the fact that respondent sees only one price. In this method, the product or service concept is described with a single price included. The respondent is then asked:
How likely would you to be purchase this product?
- Not at all likely
- Slightly likely
- Moderately likely
- Very likely
- Completely likely
Of course, this alone doesn’t help the survey author understand if this is the right price point. Unbeknownst to the respondent, they have been randomly selected to be in one of three or more different groups, each of whom will see a different price (e.g., Cell A sees $40, Cell B sees $50, Cell C sees $60). The survey results can then be cross-tabulated by cell to see how pricing effects purchase likelihood.
Strengths
- A strict monadic price test hides the fact that pricing is being tested, removing an opportunity for price negotiation on the part of the respondent.
- Monadic tests are simple to write and administer.
Weaknesses
- Monadic price tests require large sample sizes, with cell sizes of 100 to 400 respondents. Small cell sizes make it harder to estimate the price elasticity curve given the wider margin of error.
- The respondent must compare the presented price to an internal reference, making this method – like other pricing methods relying on direct questioning – a measure of price awareness.
Some monadic price tests are marketing experiments, where each recipient of the offer sees only one price and can actually buy the product at that price. Such tests are phenomenal indicators of actual behavior, as opposed to predicted behavior. For instance, the price for the integrated compiler, Turbo Pascal, was set at $49.99 upon its launch in 1983, hundreds of dollars below competitive packages, as a result of such a test.
Variations on monadic price testing involve the respondent seeing only one price at a time in sequence, but such variations quickly make it clear that the research is about price.
Monadic price tests are most useful when the product concept is fixed and price is the primary attribute being researched.
This is part of a series of pricing research posts that Michaela Mora and I are writing. The series so far: