A few years ago, I attended a product test where a KOL used a product developed by a start-up to provide feedback. At the end of the test of the highly innovative medical device, a member of the team asked, “How much would you pay for this product?”.
Although the intention was laudable because I agree with collecting data from customers for pricing a new medical device, unfortunately, the question was wrong. Therefore, do not ask this question during customer interviews about the price of new medical devices.
So, if you’re thinking about contacting your potential customers to ask them about pricing of your new medical device, you should read this post to avoid making some of these mistakes.
Why “How much would you pay for this?” is a wrong question
The first problem with this question is that when customers are asked about the pricing of an innovative and well-differentiated product, they simply don’t know what to answer. So, they will tell you a guess.
Consequently, the information you might collect is not useful for correctly setting the price band of a new device.
The second problem is that the question leads to speculations and hypothetical thinking. Generally, human beings are bad at making predictions. They tend to be over-optimistic about the future and will lie to please you.
Thirdly the question is wrong because we think about price in relative terms. So in the case of a well-differentiated product, it is difficult for the customer to identify the reference product and its price to compare.
Goals for price setting customer interviews
In order to get the potential customer interested in your new medical device you have to price it correctly. Correct pricing requires knowing your customers and what they’re willing to pay.
These are the most relevant questions to ask yourself before deciding the pricing and using qualitative research you want to get the answers:
- Is the target customer willing to pay for the product or service?
- What is the targeted customer willing to pay?
- Should I offer different levels of products or services at different price points?
- Should I adjust my pricing band?
- Is the targeted customer willing to pay more for my product?
- Can I base my price on value?
- Should I consider bundling two or more products for a single price?
- How does the customer want to buy my product or service?
- Can I increase the willingness of the targeted customer to pay for my product?
Better questions about pricing
The following questions can help you to find out the answers to your questions regarding the price of a new medical device during customer interviews.
–How do you address the problem this product solves today?
–How much do you currently spend on it?
These two questions allow you to identify potential available solutions, substitute products, alternatives, pain points, and the cost of these options. These are very useful insights because they can be the base for defining the value proposition, communication, and the reference for setting a pricing strategy.
Additionally, you will identify potential sources of value which could be the foundation for the correct pricing.
If the customer doesn’t know how much they spend for the problem or is not directly involved then you can continue with the next question.
–What budget do you have allocated to this, and who controls it?
The purpose here is to find out who is paying for the problem and how much is allocated. Sometimes you will uncover that a problem of your customer is paid by another stakeholder.
–If price wasn’t an issue, would you buy this product?
This question helps you to understand if there is any barrier to buying and using your product (not in relation to the price). If the interviewee takes time to answer it is not a good sign. The answer you are looking for is a compelling “Yes” without hesitation.
If the customer turns out to not be representative of your target customer, it is not a big problem, but it is pointless to continue the discussion about pricing.
What’s important is that this question allows you to identify if the price is an excuse for not buying the product, keeping in mind that sometimes people want to avoid being direct.
–At what price would you consider the product to be…
…too cheap
…a great deal
…fair
…expensive
…too expensive
–And why?
Following up with the “why” question is extremely important because you will understand the customer’s mental pathway and what they consider as a reference to provide the answer.
These groups of questions provide the rationale behind the numbers and have the potential to identify any price anchors that may exist in the minds of the customers.
Moreover, they allow you to determine psychological pricing barriers; for example, if the vast majority of the interviewees consider €500 as too expensive and €50 too cheap you have collected the threshold above and below at which the attitude towards your product’s price changes.
Final thoughts
Pricing questions are the hardest to answer through qualitative research. With this set of questions, you should be able to collect information regarding the pain points of the current solution, the cost associated with the problem or the current solution, and what the customer considers an acceptable or unacceptable price.
To gather accurate information during pricing interviews, the interviewee must have a clear and correct understanding of the product and its value. In this way, he or she will have a correct perception of the value generated.
Finally, because interviewees tend to be polite and not hurt you, make sure to explain the objectives clearly that they’re not doing you any favors by sparing your feelings, and that you want to collect the truth.
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Thanks for reading.