October 10, 2022
Alongside Price Sensitivity Meter (PSM), the Brand Price Trade-Off (BPTO) research technique is another useful pricing research tool that can be used before launching a new product to market or when reviewing an existing product’s pricing strategy. It can also be used to measure brand equity as it effectively assesses the value and elasticity of the brand in question.
Understanding BPTO helps businesses make informed pricing and positioning decisions. It allows marketers to gauge how much of a price premium customers are willing to accept for their brand, or conversely, how much value they need to add to justify higher prices.
For example, luxury brands rely heavily on positive BPTO dynamics; customers pay more because of brand prestige and perceived exclusivity. Mass-market brands, however, may compete more aggressively on price while maintaining acceptable quality levels.
In a typical Brand Price Trade-Off research study, several brands or products in a category are shown together, and the respondent chooses their preferred option. Then prices are adjusted (up or down) for one or more brands, and the respondent chooses again.
This is repeated numerous times so that purchase intentions can be measured at a range of price points. Overall, the output of the research provides the willingness of the price that individuals are willing to pay for a certain brand or product and allows brand owners to understand the take-up of brand-specific price points.
Other pricing techniques to consider include simple willingness to pay questioning, Monadic price testing, Price Sensitivity Meter (PSM) and Conjoint Analysis, Willingness to pay or alternatively, the analysis of actual sales or trials using regression and modelling methods to assess price elasticity. For more information check out Vision One’s new product development and pricing research.
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