Case Study:
Consumer Health Device Price Elasticity Study
Challenge
Our consumer device client was looking to launch an innovative mass market product and wanted to identify its optimal pricing, that was acceptable to consumers and maximized revenue, with a goal of developing the nascent market for this product.
Our Custom Approach
We designed a discrete choice (conjoint) study to mimic consumer buying behavior in the client’s product category. The study featured the client’s product and three other substitute products. (While there wasn’t a clear competitor, we used substitutes that consumers currently used to meet their needs). The conjoint design included attributes for core category benefits, availability of virtual consultation options and various price points to help assess sensitivity across the range of prices.
The study quantified the importance of key attributes in driving product choice. The underlying consumer preference data collected through the conjoint was loaded into a simulator to run price elasticity estimates in aggregate and across key segments of interest.
The main deliverable was price elasticity curves that showed the decline in volume/share with each successive price point across the entire pricing range. It allowed us to identify the “elbow” price point at which volume declined precipitously. It was recommended to stay below this magic price point to safeguard volume.
We also provided revenue curves alongside the price elasticity curves to assess the revenue impact of price changes.
Business Implications
By analyzing the price elasticity and revenue curves, we provided guidance on the optimal consumer-acceptable pricing range, which helped maximize revenue, with an eye toward growing the market for this nascent product category. This was a key input in their volume/financial forecasts, which was an essential element of their investor pitch decks.