Challenges in Cosmetic Product Pricing
Cosmetics are in the lifestyle and brand business, therefore pricing not only determines the profit you make when considering costs and customer preferences, but the price can suggest quality or exclusiveness of a cosmetic brand. People respond emotionally to brands which is why customers are willing to pay a higher price for certain branding or characteristics regardless of the markup price. Price optimization for cosmetics brands is an area where PriceBeam has long experience and expertise. Consumer goods companies benefit from price optimization more than any other industry, but at the same time, it is often an incredibly challenging task. Cosmetic brands are being increasingly transparent about costs , due to an increase in demand for transparency from customers in terms of product costs and ingredients, and this leads to a greater need to find the optimal price for your cosmetic brand products
One of the most vexing challenges faced by cosmetic brand firms is setting one price that unifies all internal objectives: one price that simultaneously boosts top-line growth, is aligned with the brand positioning, and increases penetration and growth. Our pricing solution addresses this challenge by using data and statistics to find a price that does just that. And it works every time. PriceBeam has worked with companies from a broad range of industries, and we apply the best practices from all industries when we help cosmetic firms optimize their pricing. In that way, we continuously improve and innovate our current pricing method, making sure it stays ahead of the game and is adjusted to prevailing industry trends.
- Price Positioning & Strategy
- New Product Pricing
- Market Launch Pricing
- Assortment Optimization
- Value Communication
- Price Increase Implementation
- International Pricing
- Promotional Optimization
Price Positioning & Strategy
Setting the overall price position against other products in the assortment, or against competitors, is always a key challenge in cosmetics.
If you need to price a product (or service) in a new market, it makes all the difference in the world if you understand customers' willingness-to-pay.
Demand / WtP curves like the ones above, show the optimal price point where the curve peaks. In this example, the best price to optimize quantity is 10, whereas the optimal price for optimizing revenue is 15.
In the old days when research was expensive, this could be difficult to get through a corporate approval if launching in many markets at once. These days, with cost-effective research options from e.g. PriceBeam, the cost of getting these crucial insights should no longer be an issue.
Brand Health & Pricing
The price is important across the entire Marketing Mix, including the promotion and branding of a product or service.
The price sends numerous messages to the customer, all of which is important to how she views the brand, such as the level of quality, the social recognition that comes with owning the product, and the value she will get. Therefore, it is important that the price not only generates short-term profits, but also benefits the long-term brand perception by being aligned with the positioning of the product or service.
Setting a price that supports your positioning is both a function of your competitors’ prices and the willingness to pay for your product or service. When customers compare your product to alternatives, they don’t compare it to all products on the market, but to products that they view as being of similar value. This value is the benchmark that you use to set a higher or lower price, depending on your brand positioning.
Segment The Customers
Understanding different customer segments' willingness-to-pay is one of the most powerful tools for increased revenue and profit. After all, different customers have different levels of willingness-to-pay.
New Product Pricing
Understand consumers' willingness-to-pay for new products, and use such insights to optimize prices when launching innovative products.
Market Launch Pricing
Setting the right prices when launching into new markets is often a challenge in FMCG/CPG companies. PriceBeam helps understanding market differences and setting optimal price points for each.
Market Launch Challenges
Pricing Managers, Marketing Managers, and Sales teams often find it more difficult to get pricing right when launching a product in a new market, as opposed to pricing the same product in an existing market. In theory existing-market pricing should go through the same steps as new-market pricing and look at value drivers and willingness-to-pay, but in many situations existing markets mean there is a reference point to base the price on. Such a reference point is lacking if pricing for a new market.
Understand the benefits and features that consumers value as well as those attributes that don't impact consumers' willingness-to-pay
While overall willingness-to-pay is a useful start, for really professional new market pricing, the next step should be to break down the willingness-to-pay into the individual value drivers. For what features or benefits are customers willing to-pay, and how much.
A good method for understanding the individual value-drivers is to use choice-based conjoint analysis. In this type of research (see e.g. PriceBeam's solution), respondents are shown a set of product choices. He/she then chooses his preference and is shown a new set of choices with other configurations; and again; and again. Through the choices it is possible to determine how much value the respondent puts on the individual features. The outcome: a series of value-drivers and the value potential customers put on them in the new market.
Price Increase Implementation
Prices should not be static. Quite the contrary, it is best practice to adjust prices upwards regularly, at least in line with competition and inflation, but often also higher thanks to brand innovations.
Quite often overlooked when pricing a market launch is what happens next year. Or the year after? Make a plan for how prices should evolve over time in the new market. Do you start high and then gradually lower the price as the product matures or becomes obsolete? or do you start low and then introduce price increases?
The answer should really lie in what the expected willingness-to-pay is over time. In most businesses and industries, it is likely to be a more solid strategy to start high and then over time reduce the price is necessary. This is often associated with human psychology, where it is easier to accept a price reduction than a price increase. Especially start-ups get this wrong, where they value themselves too low to begin with, and then struggle to increase prices later. But also big corporations get it wrong from time to time.
International Price Management
Prices vary across countries. Understand differences in willingness-to-pay per market and set prices accordingly.
Actually, in most industries there is a marked difference in prices between countries. This for a good reason: customers are willing to pay a higher price in some markets than others. So while it can in certain instances be tempting to introduce a single, global price to simplify IT systems or manage customers who exploit price differences, the upside and benefit from differentiated pricing around the world is significant. So don't fall in the trap of harmonizing prices.
PriceBeam market research can be run seamlessly in 109 countries around the world, with results ready and comparable in less than a week. Use our cost-efficient research to monitor WtP and optimize prices globally
Use market research to understand the differences in willingness-to-pay across all items in an assortment, and optimize both prices and range.
How many products or services in an assortment, and their individual prices, are challenges faced by many brand managers, product managers, or customer insight executives. PriceBeam's willingness-to-pay research can reveal how customers see the indivudal items in the assortment, and how they would choose between them.
Solve different pricing challenges:
- Test willingness-to-pay a premium for brand extensions.
- Determine the ideal number of items in the assortment
- Test price anchoring effects
- Understand willingness-to-pay segments/groups.
Understand consumers' potential reaction to different promotional mechanisms or discount levels, and optimize the overall revenue.
Discounting and promotions are prevalent in most industries. Running a promotion or giving a discount can, when done properly, deliver incrmental sale or help gaining access to new customers. With PriceBeam's Willingness-to-pay research you can quickly research what your customers really are willing to pay for a product or service in a given market.
Solve different pricing challenges:
- What promotional mechanisms work well and what don't?
- Predict customer choice based on promotions offered.
How Does It Work?
PriceBeam’s solution conducts extensive market research, collects and analyzes data before delivering a detailed report on your customer’s willingness to pay. This data will enable you to stick out from the competition, maximize profit, and set prices that aid your long-run brand positioning.
Define offering & target market
You describe your product/service on our cloud-based platform. You also define the target market to research.
Create Market Research
We add all the research details, statistical setup, etc. so you don't have to worry about it.
Conduct Market Research
We collect responses about the given product/service in the defined target market.
Analysis & Results
The results are aggregated, analyzed and presented in our cloud-based solution.
Why You Should Choose PriceBeam?
PriceBeam delivers strong value on a number of fronts, which is why our clients choose us.
PriceBeam's studies ensure statistically significant results about willingness-to-pay.
Results as fasts as 48 hours in B2C and 1-2 weeks in B2C.
1% change in price delivers 11% improvement in value for the average company.
Easy to Use
You define the product and target market. PriceBeam takes care of the research and statistical details.
PriceBeam studies can be run in 109 countries. PriceBeam takes care of the localization.
Using cloud technology, PriceBeam studies cost a fraction of classic, old-fashioned market research.