Brand price trade off

In order to gain insight into the effects of varying price points on purchase behaviour, many retailers utilise the Brand Price Trade-Off (BPTO) research technique before launching a competitive product to market. This form of assessment provides a simple yet effective way of assessing the relative value of a brand. With strong brands often commanding a higher price range, techniques such as this can employed to identify how far the brand equity can go in isolating a price point from its competitors.

Within such a study, various products or brands from a particular category are shown simultaneously to respondents who are then asked to select their preferred option. Once selected, the prices for each product or brand are then adjusted, and the respondent is asked to choose again. This process is then repeated several times in order to build up a comprehensive view of the price range brands can comfortably operate within in which the consumer is likely to make the purchase. This allows retailers to gain a clear idea of the likely take up of various brands at different price points, allowing for the accurate estimation of profitability levels.

Additionally, since retailers, particularly within the FMCG market, often provide a family of brands at both low, mid and high price points, this technique can assist in identify the optimal positioning for this range of products in order to maximise revenue.

The BPTO technique is generally utilised by retailers when there is very little difference from their product to others available, therefore it is easily replaceable and unlikely to hold any great levels of loyalty or provide consumers with a unique offering. For industrial or services brands, the offering may be likely to provide a slightly different feature or functionalities. Therefore, in these circumstances a more sophisticated form of BPTO using interactive techniques may be utilised.

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Brand price trade off

Brand price trade off

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