Car Company: Product Development – Price test and business case justification
The challenge:
A car company had developed an aftersales package designed to build loyalty from both vehicle and service customers.
A number of business case scenarios had been produced based on different price assumptions and different loyalty impact rates.
Quantitative research was required to justify these assumptions and test for price elasticity at the proposed price points.
Importantly, it had to be established if the product was seen as a genuine demonstration of the brand’s values and not just as a marketing offer.
What we did:
Build a sample of car owners within a certain segment of the car market. Three price points were shown to the sample in isolation rather than asking the entire sample which of 3 prices would they like to pay. This quantified the demand at 3 different price levels.
Additionally, certain attitudinal statements about the product were asked.
What happened:
The business plan assumptions about likely take up rate were quantified and within the range of scenarios proposed.
The middle price of the 3 however, only saw an indicated 2% drop in demand which was more than outweighed by the extra income that would be generated (by £xm). Additionally, at the middle price, car owners perceived the offer to be less of a marketing trick and more credible.
It was also established that there was a correlation between ultimate vehicle loyalty and the amount of contact the customer had with the dealer network. This enabled the client to accurately forecast the uplift in loyalty and future vehicle sales which was instrumental in getting the product approved by the European board.