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Research Trail Guide: Price research #2 – Relative spend

Are you the bun or the pickle in your customer’s life? Analysing their spending is the best way to know for sure.

If you’re trying to work out how to price your product or service, it’s very hard to go for the jugular and ask customers “how much should this cost?”. Don’t worry, us sneaky researchers are good at finding indirect ways to answer questions, so we’ve got your back.

Our last post was the pricing piano 🎹 which is all about positioning relative to competitors, this week it’s the relative spend burger 🍔 – another way to get under the skin of how people think about price.

What is relative spend?

When people pay for a product, app or service, it’s not the only thing that’s going on in their lives. Seeing what else they are spending money on can help us position where our solution fits into people’s overall context.

Comparing the budget allocated to different, but adjacent purchases is what the price consultants call ‘relative framing’ (you can use this term if ‘spend burger’ doesn’t meet your standards). It’s not the same as comparing the price of competitor solutions, which is what we were doing on the pricing piano.

This allows us to:

  1. Work out the total spend across a wider context (not just what they spend on one solution)
  2. Spot segments that allocate way more budget to our category than others, so you can get in on that action
  3. Position the pricing of a completely new solution when there are no competitors to compare to
  4. Identify purchases that are adjacent to your product that might not have been obvious
  5. Understand how customers allocate budget to certain things and where that budget comes from so you can tap into it

Why burgers?

If you know me (Andrew), you’ll know my two favourite things in life are burgers and analogies. A burger is a stack of essential and less-essential ingredients. Let’s not get into a flame war about whether cheese is essential, but I think we can all agree that a burger (meat or equivalent) is mandatory and a bun is highly typical. Condiments, salad, bacon, pickles etc are where things become more of a personal value preference.

If we think about what people spend on each of these ingredients, we can start to see not just what’s essential, important (cheese, bacon) and nice to have (lettuce, tomato, mustard), but what this means in terms of the budget they’ll allocate to each ingredient.

So we end up with a total budget allocated to the outcome (a tasty burger) and the relative spend on each of the adjacent ingredients. 

If we think about the burger itself as the focus of our simplistic analogy:

Competitors: supermarket frozen | supermarket high-end | homemade | lamb burger | premium wagyu | veggie | from the butcher | a big ol’ mushroom
Adjacent items
(tasty overall burger): bun | cheese | salad | condiments | pickles | onions

Here are some examples of products and adjacent purchases we’ve encountered in recent projects:

An employee gifting solution

Competitors: hamper | branded swag | voucher | food or drink item
Adjacent items (employee benefits): salary | bonus | healthcare | training | events | wellbeing

Premium bike luggage system

Competitors: different kinds of pannier | backpacks | trailers
Adjacent items (bike adventure gear): car racks | the bike itself | bike clothing | tools | pump | tuning services

A sleep school for babies

Competitors: sleep consultants | digital sleep courses | sleep books | night nurses | sleep devices
Adjacent items (baby wellbeing): dietician | swim coach | baby furniture | personal wellbeing solutions for parents

How do I use the spend burger technique?

In research, we love to do a ‘card sort’ where we get people to prioritise or categorise items written on cards. It helps us to understand what’s going on in their brains and, in this case, their wallets.

Example, our product is a corporate breakfast service that provides offices with daily fruit, pastry and cereals which they can order through an app. In this case, the zoomed out category might be employee benefits

Here’s how I’d run a relative spend analysis with the target customer (in this case probably an HR manager):

1. Zoom out

Ask questions that establish the category(s) that your solution might fit into:

  • What are all the other perks and benefits that are provided to staff?
  • Is food and drink on that list of perks?
  • What are all the kinds of food and drink-related perks they get?

Zooming out is a bit abstract, often purchases sit in multiple categories and it’s hard to find the right level of abstraction. Food and drink perks may be too narrow, with only a few comparators, so we ask about employee benefits in general. 

2. Build the card sort

Write down all of these answers on cards:

  • Use physical cards/stickies or a digital whiteboard like Miro
  • Don’t worry about writing irrelevant or too many things down, you’ll filter them later
  • It’s sometimes helpful to have a colleague write if they speak fast

3. Rank the cards

The customer then puts the cards in descending order of spend.

  • How does spend on food-based perks compare to other perks?
  • Where does breakfast spend sit against other daily foods/drinks/snacks?
  • Are there any other buckets or categories we should be aware of, like different budgets being charged

4. Slide in your product 

If they aren’t already buying a direct competitor, now’s the time to see where your product fits in.

  • Try to explain the offer in concise way that makes it easy to compare
  • Where would a breakfast service sit on this list?
  • What item would you never place it above?
Here's a simple example

5. Bonus task: Try for numbers

Certain items are likely to command way more budget, which won’t be reflected in a simple ranked list. For example the spend per head on an annual Christmas party probably exceeds office snacking by an order of magnitude. Here are some ways to find this out.

Depending on the topic, a customer may or may not give exact spend numbers for these items. 

  • Make sure that you respect any ethical/confidentiality requirements before asking money questions
  • Let them know they’re not obliged to answer all your questions
  • Keep it breezy: try rough price ranges or even £££££, £££, £ tags
  • Another way to do it is do give them imaginary credits
  • “If lunch is 100 credits, what is breakfast?”

6. Repeat on more customers

You know the drill. Speaking to a mix of customers will help you to look for patterns (and ignore outliers).

How do I use the data?

Firstly, we’ll find out if we’re the cheese or the bread in people’s lives! Spending is a pretty good indicator of what is most valuable or essential (and what they’d cut first if they had to).

We’ll find items that people categorise as similar to our product and get upper and lower limits from the items above and below it.

And finally, if we found out that lettuce = 1/20th of the value of a burger, we’d have a relative price that makes intuitive sense to people.

The result: a rich picture of spending in our customer’s business which can inform your pricing strategy, along with other insights that can inform product strategy and marketing.

Are you thinking about doing some pricing research and want some help planning or running it? Get in touch.

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