Manual is a new brand of men’s anti hair loss shampoo, sold online as part of the London-based start-up’s wellbeing platform for men, which states a mission to enable men take control of their health and happiness by providing knowledge and solutions for every part of their wellbeing.
Power Shampoo claims scientifically proven effectiveness with ingredients caffeine, biotin and saw palmetto. Priced at £14, the 250ml bottle is claimed to last for two months’ use. To find out the profit maximising price for the shampoo, we ran a Qualified ‘Would Pay’ steer, which is performed in two stages: firstly it asks consumers whether they would buy into the category, in this case, men’s shampoo, and secondly how much they would be prepared to pay for the product.
The platform lets us enter our chosen starting price for the test product, based on which the question automatically proposes new values depending on a consumer’s reaction. If a price point is rejected, a lower value is proposed. Conversely, an acceptance of a price point leads to a new higher value suggestion until the optimum price has been reached for that consumer.
In our test the starting price corresponds to the actual product price, £14. The minimum price is set to £8 and the maximum to £20. The resulting graph, produced by the platform, shows that the profit maximising price is £20, even if the product cost is as little as £2.17. Product cost can be adjusted manually simply by dragging the green dashed line up and down and the profit maximising price would change accordingly:
23% of consumers buying men’s shampoo would pay £20 for Manual’s product. However, as the product is only available online, delivery charges are an important consideration. A £2.95 fee applies for purchases under £20 and free delivery is available for over £20 worth of shopping on Manual’s website. With a profit maximising price of £20, the brand could offer free delivery, which is likely to attract more one-off purchases.
For comparison, we ran the same test, however this time informing consumers about the delivery charge and adjusting the initial price parameters to include it. The £2.95 delivery cost makes the starting price £16.95, while the minimum and maximum prices increase to £10.95 and £22.95, respectively. The platform produced the graph below for these circumstances:
The profit-maximising price still reflects a £20 price tag, however, due to the £2.95 delivery charge inclusion, the proportion of consumers who would buy the product shrunk by nearly a third, to 15%.
Manual also offers a subscription service, which involves sending consumers one shampoo every two months. Currently, a bottle is priced at £11.90 within this scheme, but the standard delivery charge applies. We tested for a profit maximising price of this service using a Reference Pricing steer. It uses a reference product with its price, based on which consumers are asked to select from a list a most suitable price point for the tested product.
Similarly to the Qualified ‘Would Pay’ steer, the results show percentage of respondents who say they will pay a certain price (or more), as well as sales revenue by price point. Here, the reference product is a bottle of the shampoo at £14 and the profit-maximising price we want to establish relates to the subscription service without the delivery charge. The steer was sent to a subset of consumers who had confirmed in advance that they buy hair treatments:
The results indicate that a price of £11.90 will generate the maximum sales revenue, which coincides with the actual price of the service without the delivery charge. A low percentage of consumers (14%) would buy the subscription, but this is to be expected as this form of personal care retail is still emerging.
Similarly to the first round of tests, we ran a second reference pricing trial, which informed the panel that a £2.95 delivery price is included and changed the starting, minimum and maximum prices accordingly:
While the perceived value of the product remained similar, the proportion of consumers who would buy the subscription fell to only 10%. For this reason the brand should be looking to adjust its offering so that a free delivery is feasible, e.g. two bottles delivered every four months. Tests can be iterated until an optimal solution is worked out, which fits consumer requirements and is profitable for the brand at the same time.
This is possible thanks to the cost and time effectiveness of running Vypr steers as compared to more traditional survey methods. Vypr could bring results, which outline a pricing strategy, within a day. Because the Vypr solution is cost effective, brands can conduct more tests than before, with turnaround times for each test reduced from weeks to hours.