How home appliance companies can still increase margins in the face of rising production costs

Production price pressure in the home appliance Industry

Increasing production costs and high price volatility for raw materials due to geopolitical conflicts and other external market disturbances pose significant challenges for home appliance businesses.

Companies can try to anticipate these increasing production costs, for example, by reassessing their supply chain structures. Still, such disruptions stay externally influenced and are almost impossible to control or predict.

Source: ECB, ECB Economic Bulletin, Issue 03/2023

Focusing on what you can control: Counter rising production costs with intelligent price decisions

Amid an unpredictable business environment riddled with price volatility, home appliance companies are faced with an uncontrollable task – to anticipate or control these external influences. This is where a change in strategy becomes essential, one that involves focusing on the consumer side: Implementing price increases without losing out on demand. - Not just to new products, but especially to existing product ranges.

Simply increasing consumer prices will likely lead to a loss in demand, brand damage and even worse margins than before. The key here for companies is to uncover opportunities for a price increase where such won't affect consumer demand. This entails discovering the maximum amount consumers are willing to pay for specific products, without asking them directly about their preference, but unveiling their true purchase intent for distinctly tested price points through behavioural research. For this to succeed, companies can't merely rely on opinions for their pricing strategy. Successful home appliance businesses use a consumer-validated approach that allows them to understand which price increase would not lead to a decrease in consumer demand, while still increasing operating margins. While in classic market research the lower prices are often chosen from consumer surveys, behavioural research makes it possible to test various price points separately in a realistic environment. In this way, even for higher prices, better conversion rates can be measured without surveying consumers but by measuring their actions.

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Relying on consumer actions instead of opinions to increase prices

In real-life markets, consumer actions rarely match what they stated previously when they were surveyed during market research. Companies must show consumers what they could use or buy and measure their behaviour to uncover their true intention and achieve more reliable research outcomes.

Introducing consumer-validation with landing pages for innovation, product & consumer insight teams

Horizon allows home appliance companies to uncover true purchase intent based on behavioural and quantitative data by running multivariate landing page tests with consumers from social networks or search.

How Bosch uncovered a 20% price increase opportunity with the help of Horizon

How Bosch achieved an impactful 11% price increase with the help of Horizon

Bosch successfully employed Horizon for a consumer-validation test. They aimed to validate a strategic price decision for an existing product line. Using Horizon's behavioural consumer-validation software, Bosch gathered real-life purchase-intent data at scale for different price points. Based on the insights through Horizon, Bosch was able to uncover a 20% price increase opportunity which would improve their ROI, despite currently challenging market conditions.

In this process, Bosch specifically used Facebook and Instagram ads, driving the target group to three different landing page variants, each showcasing a distinct price point for the product. The data from consumer actions on these landing pages provided the crucial insights Bosch needed.

Working with Horizon was a remarkable customer experience and enabled Bosch to make an impactful strategic pricing decision.

E-Lin Tan
Global Head Smart Indoor Gardening - BSH Hausgeräte GmbH (Bosch)

👉 Get the full case study for free here.

Home appliance companies can still increase margins despite rising production costs through behavioural research

  • Production prices are highly volatile and constantly increasing, influenced by external factors companies can hardly anticipate. This forces home appliance companies to use pricing strategies that go beyond traditional market research methods to stay in control of their operating margin.
  • Consumer-validation tests based on real-world behavioural data allow for data-driven pricing decisions on the consumer side without losing out actual demand or decreasing the number of units sold.
  • Pricing decisions based on consumer behaviour can put conducting companies such as Bosch into control of their operating margin, allowing them to find the sweet spot between consumer demand and the highest possible price increase.
  • Horizon's consumer-validation testing OS can be leveraged by home appliance brands to uncover pricing increase opportunities, providing reliable, actionable insights into consumer behaviour and purchase intent and equipping businesses with the data needed to make confident, informed pricing decisions.

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Written by
Daniel Putsche
Daniel is the Founder & CEO of Horizon. He is driving the strategic development of the organization, establishing a thriving company culture with a team on a mission to help teams build products that customers really want. Daniel has a strong record in sales, marketing and building startups from zero to one. Before Horizon, he successfully founded and co-founded multiple companies, i.e. Candylabs, BikeBeat and Venture Advisory Partners.
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