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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.