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Pricing Research

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 A bunch of us here at TRC enjoy trivia, so we’ve been playing HQ Trivia using their online app for the past few months. HQ is a 12-question multiple choice quiz that requires a correct answer to move on to the next question. As a group, we have yet to get through all 12 questions and win our share of the prize pool. But it’s a nice team-building exercise and we like learning new things (who knew that 2 US Presidents were born in Vermont).  
 
Given the fun we have playing it, I can understand HQ’s success from the player perspective. Where I am a bit confused is the value proposition for its creators. Venture capital funding provides the prize money.  But there are no ads, so I’m not sure how anybody’s actually making money. There are occasional tie-in partnerships (The awesome Dwayne Johnson hosted one of the gaming sessions to promote his newest movie release, “Rampage”.)  But I suppose the biggest question is, will interest in HQ still be there when they’ve finally signed on enough sponsors to be profitable?  
 
We do a lot of pricing research at TRC, and can model on a variety of variables. But predicting the direction of demand is nearly impossible for certain products. For consumables and many services, product demand is predictable. How your product fares compared to the competition may have its ups and downs, but you can assume that people who bought toilet paper 2 weeks ago will be in the market for toilet paper again soon.
 
But with something like HQ Trivia, product demand is much more difficult to determine in advance, especially more than a few weeks from now. Right now it’s still hot – routinely attracting 700,000 – 1,000,000+ players (HQers) in a given game. How do the creators – and investors and potential sponsors – know whether it’s a good investment?  What if interest suddenly declines, either because the novelty has worn off or because something better comes along?  
 
One way to find out is through longitudinal research. Routinely check in with HQers over time to determine their likelihood to play the next week, their likelihood to recommend to their friends, and their attitudes toward the game itself. This information can be overlaid with the raw data HQ collects through game play every day – number of players, number of referrals, and number of first-time players. This information can not only help shed light on player interest, but players could also weigh in on changes the creators are considering to keep the game fresh.
 
HQers are engaging in a free activity which gives them the opportunity to win cash prizes.  But just because it’s free to play doesn’t mean the HQ powers-that-be couldn’t do pricing research (more on that in a future blog).  
 
For now, I’ll keep on playing HQ hoping I can answer all the questions, not the least of which is: when will I – and the other million HQers – no longer care? 
 
 
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pets pricing-researchIn a recent survey we conducted among pet owners, we asked about microchip identification. We found that cat owners and dog owners are equally likely to say that having their pet microchipped is a necessary component of pet ownership. That’s the good news.

The bad news is that when it comes time to doing it, the majority haven’t taken that precaution. 69% of the cat owners and 64% of the dog owners we surveyed say they haven’t microchipped their companion.

Why is microchipping so important?  Petfinder reports that The American Humane Association estimates over 10 million dogs and cats are lost or stolen in the US every year, and that 1 in 3 pets will become lost at some point during their lifetime. ID tags and collars can get lost or removed, which makes microchip identification the best tool shelters and vets use to reunite pets with their owners.

One barrier to microchipping is cost – it runs in the $25 to $50 dollar range for dogs and cats. Not a staggering amount, but pet ownership can get expensive – with all the “stuff” you need for your new friend, this can be a cost some people aren’t willing to bear. Vets, shelters and rescue groups sometimes discount their pricing when the animal is receiving other services, such as vaccines. Which begs the question, if vets want their patients to be microchipped, what’s the best way for them to price their services to make this important service more likely to be included?

It seems that pet microchipping would benefit from some pricing research. Beyond simply lowering the price, bundle offers may hold more appeal than a la carte. Then again, a single package price may be so high that it dissuades action altogether. Perhaps financing or staggered payments would help. And of course, discounts on other services, or on the service itself, may influence their decision. All of these possibilities could be addressed in a comprehensive pricing survey. We could use one of our pricing research tools, such as conjoint, to achieve a solid answer.

...

I was treated to a presentation given by Professor Joydeep Srivastava from the University of Maryland at our Frontiers of Research market research conference in May. Joydeep’s discussion focused on pricing research and perceptions of what consumers are willing to pay based on the way the prices are presented to them – whether prices for the components are bundled together or shown apart.

One point he touched on almost as an afterthought is that no one wants to pay for installation. I must agree with him that no one wants to agree to a price only to find out a few moments later that something essential (such as installation) isn’t included. This seems to break the contract, and can lead to feelings of resentment – and, as he pointed out, lost sales. On the other hand, presenting installation costs separately as an option can be enticing to the Do-It-Yourselfers who would want to be able to weigh the pros and cons of tackling that step themselves.

I was reminded of all of this when I ordered a map update to my car’s navigation system. When I received the jewel case in the mail I assumed it contained a CD which I could pop into my car CD player and install the update on my own. Only the jewel case didn’t contain a CD, it contained a memory card, and there were no accompanying instructions – not even a phone number. After popping it in my computer to look for a read-me file, I was still at a loss. So I gave my car dealer a call and they told me to bring it in for installation. When I arrived, the service technician told me I could have saved myself the trip and done it myself by inserting it in the card slot. I told him I didn’t know I had a card slot, and if he told me where to find it, I’d be happy to go do it on my own. A senior technician intervened, and taking pity on me he asked a tech install the maps and then told me there would be no service charge.

By the way, I finally found the card slot after searching for it for about 15 minutes.

There was no mention of installation in the up-front sales process whatsoever. So my first assumption was the correct one, that I should be able to do it myself. But that wasn’t addressed in the sales process nor in the product packaging. Not addressing installation up-front can lead to very different outcomes:

  • The manufacturer can keep the cost low and potentially sell more updates by not having to create detailed installation instructions which can vary by model and year. But even if professional installation was not required, leaving the consumer confused after a purchase is never a good idea and no doubt leaves consumers with some ill will.
  • In my case, the dealer took the view that my purchase of the vehicle (and the update) gave them the opportunity to help me out in situations like this.... And I could view it either as an extension of their awesome service or that their service was “bundled” into the original price of the vehicle. Either way, the dealer comes out looking good – so much so that perhaps they can charge a premium for this all-inclusive service “bundle” the next time around.
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