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Published June 1st 2020

How Do Price Changes Affect Consumer Perceptions?

We all know consumers like to get a good deal, but do you know how to measure consumer response to an increase in price or a dramatic reduction? Using Brandwatch Reviews, we found out.

If you need to increase revenue there’s one very simple thing you can do. Increase your prices.

The consumers who value your product will keep buying, those who aren’t price sensitive won’t notice, and you could stand to make plenty more money.

But what’s the cost? And what are the risks?

Up until now it’s been hard, if not impossible, to measure how a price hike affects consumer perception. But, using Brandwatch Reviews, we’ve managed to do just that.

How does a price change affect consumer perception?

For our analysis we chose to look at a popular gaming headset. It’s listed as “Amazon’s Choice” so gets a large number of purchases and gathers a decent number of daily reviews. It’s also seen significant price alterations over the last few months.

At a glance, it looks like the product is doing well (~4.5 star average overall). But could a change in price affect the star rating?

According to CamelCamelCamel.com’s Amazon pricing data, the lowest price for this headset was listed at $49.99. From February 1 to March 24, the price fluctuated between $60 – $65. On March 25, the product price spiked to $79 and it has remained within $1 of that amount ever since (up to time of writing).

When looking at the review ratings over time from February 1 – present, we can see an interesting trend. When the price rose, the number of 5 star reviews started to drop. At the same time, bad ratings (1 or 2 stars) started to grow.

Before the price increase (February 1 – March 24), the product had a 4.3 star average rating. During that time period, 279 people shared reviews, and the average sentiment was 46% positive. The rating distribution for this timeframe can be seen below.

After the price increase (March 25, the date the price spiked to $79, – mid-May), things start to change.

Over this time period, the average star rating dropped by a half a star, to a 3.8 average.

Only 198 people shared reviews for the product, suggesting fewer purchases, and the average positive sentiment rate dropped by 20%. The rating distribution since the price increase can be seen below:

That’s a 14% decrease in 5 star reviews and 12% increase in 1 and 2 star reviews.

But how can we be certain that the price change is what caused the change in reviews? There could be anything driving this change, and correlation does not equal causation.

Let’s dig into the Brandwatch Reviews dashboard to find out. When we look at the reviews from March 25 and filter by only the 1, 2, and 3 star ratings (excluding 4 and 5), we can see that many of the lower star reviews mention things like “price”, “waste”, and “purchase”.

Customers clearly don’t think the headphones compare well to the others in its price category. Reviews frequently claim that the headphones are more similar to much cheaper models. When the price was lower, people felt like they were getting a good deal. Now they feel short-changed.

If the headset continues to sell at this price without any product improvements, the overall rating will continue to drop. It’s crucial to optimize your price / quality matrix to avoid a situation where your product rating is no longer desirable, and your sales suffer.

Brandwatch Reviews gives you a way to track reviews, ratings, and sentiment in real time. Book a meeting with an expert to see Brandwatch Reviews in action.

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