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10 Tips to Better Pricing
Posted: August 6, 2010
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Create a value statement. Every company should have a value statement that clearly articulates why customers should purchase their product instead of competitors’ offerings. Be specific in listing reasons … this is not a time to be modest. This statement will boost the confidence of your front line so they can look customers squarely in the eye and say, “I know that you have options, but here are the reasons why you should buy our product.”
Reinforce to employees that it is okay to earn high profits. I’ve found that many employees are uncomfortable setting prices above what they consider to be fair and are quick to offer unnecessary discounts. It is fair to charge what-the-market-will-bear prices to compensate for the hard work and financial risk necessary to bring products to market. It is also important to reinforce the truism that most customers are not loyal; if a new product offers a better value (more attributes and/or cheaper price), many will defect.
Realize that a discount today doesn’t guarantee a premium tomorrow. Many people believe that offering a discount as an incentive to trial a product will lead to future full-price purchases. In my experience, this rarely works out. Offering periodic discounts serves price-sensitive customers (which is a great strategy), but often devalues a product in customers’ minds. This devaluation can impede future full-price purchases.
Understand that customers have different pricing needs. In virtually every facet of business (product development, marketing, distribution), companies develop strategies based on the truism that customers differ from each other. However, when it comes to pricing, many companies behave as though their customers are identical by setting just one price for each product. The key to developing a comprehensive pricing strategy involves embracing (and profiting from) the fact that customers’ pricing needs differ in three primary ways: pricing plans, product preferences and product valuations. Pick-a-plan, versioning and differential pricing tactics serve these diverse needs.
Provide pick-a-plan options. Customers are often interested in a product but refrain from purchasing simply because the pricing plan does not work for them. Although some want to purchase outright, others may prefer a selling strategy such as rent, lease, prepay or all-you-can-eat. A pick-a-plan strategy activates these dormant customers. New pricing plans attract customers by providing ownership options, mitigating uncertain value, offering price assurance< and overcoming financial constraints.