Understanding the relationship between prices and sales at Premier Farnell

Premier Farnell (www.premierfarnell.com) markets and distributes electronic components and related industrial products from more than 3,000 suppliers. Premier Farnell’s proposition rests upon consistently reliable, appropriately priced deliveries. Working with specialist b2b research agency Circle Research (www.circle-research.com), Premier Farnell needed to answer the following questions:

• What is the relationship between delivery price and sales?

• What price premium do ‘value add’ elements of delivery justify (e.g. speed)?

• What is the optimum price for each delivery option – the point at which Premier Farnell can maximise profitability?

Circle was aware that Premier Farnell was going to make major commercial decisions on the basis of the research, so it needed to be highly reliable. Buying decisions involve a very complex and subtle relationship between price and benefit, and this relationship needed to be investigated if the research was to provide an accurate steer.
More than 2,000 customers globally were surveyed. Conjoint analysis (Chapter 26) was used to help understand the relationship between features, price and purchase behaviour. Different elements of the delivery proposition (including price) and the different levels at which these might be realistically set were identified, such as different delivery speeds. Using this information, a series of hypothetical delivery propositions were created, each with slightly different features and prices. These hypothetical offerings were then grouped into sets of three and customers were asked which one, if any, they would be most likely to buy under.
This was repeated several times until hundreds of potential combinations had been compared. Analysis of these data was then used to reveal the level of demand under different feature combinations and at different price points. This exercise revealed which aspects of the delivery proposition held greatest value and helped build an understanding of how changes in pricing would impact sales.

Is nothing straightforward in b2b research?

Organisational changes are making it increasingly difficult to complete business research. It is, for example, harder to contact business executives. Routes to them are less likely to be through a secretary or even a switchboard. Phone numbers are more likely to be direct, unlisted or routed through a central department or an automatic exchange that is immune to the persuasive interviewer. On a wider level, researchers have also had to contend with both the seemingly inexorable conglomeration of the business world and policy changes on compliance. Increasingly, corporate policy forbids interviews – even in corporations that need, and commission, research themselves. In areas where there is a restricted pool of potential participants, one cannot afford low strike rates. It does not just take longer to complete the quotas, one just runs out of contacts.