22. MONADIC PRICE TESTING

OBJECTIVE

Analyze people’s purchase intention at different price points and for alternative products.

DESCRIPTION

In monadic price testing, purchase behavior is tested for several price points, but each respondent is shown just a single price. Due to this method, a large base of respondents is necessary. A variation that needs a smaller sample is sequential monadic testing, in which the respondents are shown different price points, one at a time (usually no more than three price points are presented to each respondent). It is important to bear in mind that sequential monadic testing implies some biases and usually shows a higher purchase intention at the lower prices than monadic testing.

This is probably the best method for analyzing purchase behavior at a given price; however, it is only useful if we have an idea of the appropriate price points for a particular market. If this is not the case, we would need to obtain this information prior to the analysis, either through direct or indirect survey methods (see 18.INTRODUCTION).

Figure 20: Demand Curve Derived from Monadic Price Testing

Once the data have been collected, we can summarize the purchase behavior for the different price points (e.g. 11% of the market would purchase the product at €30, €32% at 20, etc.), and we can estimate a demand curve. The data are usually collected through surveys but can also be obtained from controlled experiments.

TEMPLATE

Download the Monadic Price Testing Excel Template