Consumer price responsiveness

This is useful when attempting to estimate a sales forecast, or to indicate the effect on sales volume of a possible change in price. Two techniques can be applied in attempting to determine consumer propensity to purchase products at different prices.

Buy-response research: The buy-response method embodies the idea of price as an indicator of quality. It recognizes that there is a price below which consumers would not be prepared to buy the product, because they would distrust its quality, and that there is a price above which consumers would not be prepared to buy a product, because they would believe it to be too expensive for its worth. This results in buy-response curves, which map the probability that respondents will buy the product in the range of prices between the minimum and maximum. This is discovered using a quantitative survey in which the respondents are asked whether they would buy the product at up to 10 different prices, which cover the range between the minimum and the maximum. A curve is then drawn of probability of purchase against price. For products entering into existing markets, respondents could also be asked the 'price last paid' and this too would be charted. Analysis of the charts produced from this procedure is thought to indicate optimum price levels.

Propensity-to-purchase research: Attempts to calculate consumers' propensity to purchase a product at different price levels have used mock selling situations. At the end of the product tests, and sometimes at the end of concept tests, the interviewer may offer to sell a pack of the product to the respondent. The frequency with which they agree to buy at different price levels is recorded and this is thought to give some indication of the product's worth to relevant consumers.

Research about advertising may be used before, during or after an advertising campaign, and if the campaign is of sufficient significance it may be worthwhile using all three timepoints.

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