Price research for a new drink
Price is a research question as much as a costing one. A few methods will show you the range buyers accept before you commit to a label and a price list.
Start with the floor
Work out your cost per litre or per pack first, including excise or duty where it applies, packaging, delivery and a margin to the trade. Below that line you lose money however popular you are. Our guide on cost per litre of beer shows how to build it.
Retail and trade margins matter. The price on the shelf is not what you receive. Check how pricing works in your state, since some states set or approve prices and others allow more freedom.
Map the price bands
From your retail audit, list products by price per litre. Group them into bands. Place your drink by asking which products a buyer would compare it with. A craft lager priced well above mainstream lagers must give a reason to pay more, such as style, freshness or story.
The Van Westendorp questions
The Van Westendorp price sensitivity meter is a standard survey method. You describe the product and ask each person four questions: at what price it would be so cheap that they doubt its quality, at what price it is a bargain, at what price it starts to feel expensive but is still worth considering and at what price it is too expensive to consider.
Plot the cumulative answers. The crossing points give an acceptable range, from which you can pick a price. It needs a few hundred respondents for a stable result and it assumes people have a feel for the category, which beer drinkers do. It tells you about the range, not the exact best price.
Direct choice tests
A second approach is to show a small set of products with realistic prices and ask which the person would buy, including a "none of these" option. Change the price of your product between groups of people and compare shares. Keep the groups similar and the test short.
Whatever you use, test the real pack and the real brand if you can. People price a drink differently once they see the can.
Price tests in the real world
A taproom is a good laboratory. Change a price for a few weeks, watch volume and check the effect on the beers beside it. Keep a log. A small rise that leaves volume nearly unchanged tells you the price was too low. A small rise that cuts volume sharply tells you the opposite.
Be fair with customers and never mislead them on price. If you run a promotion, make it clear and follow local advertising and pricing rules, which differ by state.
Pack size and price per litre
Buyers compare shelf prices, but you should compare price per litre. A 330 ml can and a 500 ml can at the same price are very different offers. Work out price per litre for every product on your audit sheet and plot them against pack size. You may find that the gap in the market is a pack size and not a price.
Think also about the occasion. A single can for a quick drink, a four-pack for home and a keg for a bar each carry a different price logic. Research each separately.
What price says to the buyer
Price is also a message. A price far below the rest signals a mainstream or a poor-quality product. A price far above says premium. The buyer will expect the beer, the pack and the story to match. If they do not, repeat purchase will fail however good the first impression.
This is why price research should sit alongside a blind tasting and a look at the pack. Ask tasters to guess a price after they taste, then compare with the price you plan. Large gaps in either direction are worth thinking about.
Whichever method you use, report the result as a range with the evidence behind it. A single magic price is rarely real. A range gives you room to adjust once the first sales data arrives.
Review the price after launch. Costs change, competitors move and your own reputation grows. A yearly price review, backed by the same method, keeps you from drifting.
Check against your plan
Run the chosen price through your market size and your cash flow. If the price that sells does not cover costs, you need either lower costs or a different product. It is better to find that out on paper.
Common questions
Should I price below the competition to win customers?
Not by default. A low price tells buyers about quality and eats your margin. Price on the value you offer and the costs you carry.
How many people do I need for Van Westendorp?
A few hundred gives a stable curve. With fewer, treat the range as rough.
Do I include tax in a survey price?
Show the price the buyer will actually pay, so include any tax. Say so in the question.
