Price sensitivity research is an extremely important tool in your business arsenal. Especially in times of economic uncertainty – like 2009 where we saw deflationary pressure, a volatile exchange rate, rising debt and stagnant wages.

One of the best ways to manage pricing is to regularly assess the price sensitivity of your target market and adjust accordingly.

Pricing research is considered a challenge by many companies.  They are not sure how to do it and whether the results will be effective.  But there are a few tools for doing reliable – and powerfully useful – pricing research.  The traditional approach has long been Van Westendorp’s price sensitivity meter, which starts with four basic questions: 

1. At what price would you consider this product so expensive that you would not consider buying it? (Too expensive)
2. At what price would you consider the price of this product so low that you’d question its quality? (Too cheap)
3. At what price would you consider the product starting to get expensive – not out of the question, but you’d need to give some thought to buying it? (Expensive)
4. At what price would you consider the product to be a bargain – a great buy for the money? (Inexpensive).

The answers are then plotted on a graph and analyzed. More info on the process can be found here. 

There are also newer tools that enable managers to test various price / product scenarios in a very cost effective way. These methods employ conjoint analysis, which presents various options to buyers and gathers input on their price sensitivities and preferences.  Much has been written on conjoint analysis, and it’s a tool we use whenever possible to get insight on price sensitivity – here’s a quick primer on conjoint analysis from one of the few companies who build software to deploy conjoint analysis : http://www.sawtoothsoftware.com/download/techpap/undca15.pdf

These two tools are useful ways to gain cost effective and actionable insight on pricing strategies, for lean times and for good times.

Roger Martin, Dean of the Rotman School of Management at the U of T, wrote about the growing malaise about big business in a blog at Harvard Business Review.

His message is that the modern corporate environment, in which shareholders who have no real ties to the companies they own but do control all the actions of those companies, exerts a negative influence on the companies, their employees and their communities.  It creates an environment that forces managers within those companies to lead inauthentic lives, which causes them to lose their moral compass, which leads them in turn to behave ever more inauthentically.

It’s a complex argument, but Martin lays it out well.  And his message is that this situation is totally unsustainable because it ultimately leads to decreases in shareholder value.

What’s missing from the article, though, is the solution.  How do large organizations remedy this problem?  How can large, public businesses serve their communities and their employees as well as their shareholders?

I think one solution lies in the business model of employees as shareholders – like WestJet.  This ensures alignment between the corporation’s financial returns and those who generate them.  It reduces one of the complexities of a model in which there are 3 primary stakeholders – customers, employees and shareholders.  Ie, it reduces the model to customers / company.

There are other ways – what have you seen that’s working?

For a good part of the 90s I lived overseas. Half a year in France, a year in the UK, and then 3 in Japan. And I travelled extensively – in more than 30 countries by the year 2000. I came back from that experience a changed person. Before living overseas, Canada was just the place I was born and grew up. After living overseas, it was the place I chose to be. I knew what other countries offered and what we had here. I realized we have something great.

Ever since then I’ve been working to take more of Canada to the world.  Canadian businesses are so often great at what they do, but not great at telling others about it.  So I (and Mezzanine) spend my time marketing those great companies to the world, and at home.  We shout their praises from the highest mountain tops so that others know about them and how great they are.  These companies deserve to be recognized as world leaders for what they do – and to enjoy the financial rewards of their innovation, initiative and hard work.

I’m enjoying watching the Olympics and seeing Canada pursue an aggressive goal and achieve it.  This is an exciting time.  I hope it’s the start for all of Canada – not just the sports world but the business world too – to pursue their rightful positions as global leaders.  We have every reason to do so.

Competitive intelligence is one of the most important ways a company can understand market trends and where its competitors are innovating and positioning themselves. Without it, a company’s strategy will be misinformed.
Competitive Intelligence is tough though, especially for small private companies. Fortunately there are a growing number of useful and free competitive intelligence tools to help. Here are a few of our favorites:

Archive.org allows you to dig up past versions of a company’s website. If one of your competitors wrote a case study in 2005 that you want but is no longer on their website, archive.com might be able to help you find it. Using Archive.org also lets you see how your competitor’s go-to-market strategy has evolved over time.

Spyfu. This is a goldmine for understanding competitors’ online advertising. Using it, you can determine what keywords your competition uses for AdWords, what their daily AdWords budget is, and what their daily traffic volume is. And that’s just the tip of the iceberg.

Slideshare.net is essentially a search engine for PowerPoint presentations… but it is usually possible to dig up ‘confidential’ presentations and templates that can be very informative.

LinkedIn can be used for more than just social networking. It can give you estimates on a company’s size, its turnover, and what positions, if any, are currently open. But be careful – for smaller companies (under 100 people) LinkedIn is usually an inaccurate portrayal of current staffing.

Yesterday I commented that the business world is changing more rapidly than it used to. That’s obvious to all of us. The implication for companies is that reacting to change is no longer enough for survival. For a company to survive – and certainly to thrive – it must proactively adapt to change. It must spot trends before and as they emerge, and innovate in order to enjoy success in the future.

How can a business do this? It isn’t as mysterious as having a crystal ball. The great innovative companies that I’ve seen do it through these four tools:

1. They use customer insight and competitive intelligence tools that work, and they try new ones as they emerge.  (I’ll write about some cool new competitive intelligence tools in my next blog.)
2. They have internal and external feedback mechanisms to track customer and employee satisfaction and capture ideas.
3. They have structures that are lean and nimble so they can innovate and implement new ideas quickly.
4. They are open to the possibility that they don’t know everything, and build structures to allow them to tap into market movements that are difficult to foresee.  One tool for this is a Gambling Fund.  I’ll also write about this in a later blog.