How to estimate the optimal price for a new product?

    No price is too high when it comes to the safety of your child. Nevertheless, we wouldn't pay €2500 for a car seat or €150 for milk bottles. So how do you determine the price for a new product, for example, a baby monitor?

    Dräger wanted to know what the optimal price was for their newest baby monitor: the Dreamguard. Find out how this was measured with NeuroPricing™ and how this helped Dräger to launch the product successfully.

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    An innovative baby monitor

    Dräger is a global market leader in medical and safety technology. The Dreamguard is their latest product: a baby monitor with a motion sensor.

    Dräger took full responsibility in branding this new product. Before launching Dreamguard, they had a major challenge: the technology required a selling price of over 200 euros to be profitable.

    From Dräger's perspective, they did not know whether consumers would recognise and appreciate this unique product or whether consumers would see it as "just another fancy baby monitor". Baby monitors are usually priced much lower.

     

     

    Draeger baby monitor NeuroPricing™ study

    Dräger's research question:

    What's the optimal price to launch our new product?


    How was it studied?

    We investigate Dräger's question using our scientific tool NeuroPricing™. NeuroPricing examines the influence of the price on the perceived quality to determine consumers' price-quality perception. The optimal launch price (over 200 Euros) would make or break the product, so it was crucial for Dräger to find a price that:

    1. would correspond to the target group's value perception.
    2. would be a quality indicator. 

    NeuroPricing™

    NeuroPricing™ uses EEG to measure the perceived value of a product or service based on brain signals. EEG records the ultra-fast responses of different brain areas.

    With EEG measurements, we create an index called Feel Good Price. This shows whether a price fits consumers' price-quality perception. The Feel Good Price indicates when your target group is prepared to pay the requested price. It's used to calculate the expected revenue and profit at various prices to find the optimal price, because the optimal price is not necessarily the highest one.

    Results

    Figure 2 shows you the results of the Feel Good Price. The demand curve (figure 3) and the revenue curve (figure 4) of the product were estimated based on participants' brain responses.

    To confirm the difference between what people say is a good price and what people unconsciously think is a good price, a questionnaire survey was also collected. The difference between the conscious and unconscious responses is shown in figure 3. The grey line indicates conscious responses and the green line reflects results of the EEG NeuroPricing™ study.

    As you can see, there is a huge gap between the two results (i.e. Brain-Explicit Gap). The result of the NeuroPricing™ study shows that people are unconsciously willing to pay much more for the baby monitor than they would consciously say. That is the power of NeuroPricing™.

    Draeger case Feel Good Price & Demand Pricing research

     

    drager case revenue curve pricing research


    Conclusion

    If Dräger had only collected questionnaires to find the optimal introduction price, the recommended retail price would have been less than €100. Dräger would have called off the launch of the product. The EEG study showed that consumers' (unconscious) perceived value of the product was considerably higher. Therefore, we recommended a launch price of between 200 and 250 euros. Figure 3 shows that this corresponds to a demand of between 50% and 70%.

    Dräger followed our advice and launched the Dreamguard at the price recommended by NeuroPricing™. It was a great success. At the time of writing, Dreamguard has a 4.5 star rating on Amazon Germany. Many customers indicated that the product offers excellent value for money and also stated that Dreamguard offers them a priceless peace of mind.

    Contact

    Contact us

    Walter Limpens

    Senior Client Executive

    Want to know more about the research possibilities?

    Andries van der Leij

    Head of Research & Development

    Want to know more about our research techniques

    Contact

    Do you have questions about what Neurensics can do for you? Please contact Walter.

    Walter Limpens

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    Do you have questions about our research techniques? Don't hesitate and contact Andries.

    Andries van der Leij

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