Unveiling the Art of Pricing: Strategies to Overcome Challenges and Maximize Customer Value
Decoding Pricing Challenges: Strategies for Maximizing Value and Sales Success
I was speaking with an entrepreneur the other day about the challenges of pricing. I’ve written before on how to think about pricing. Other questions that came up included: how do you change the way they currently buy? Are you capturing enough value? Is it truly too expensive or are there other reasons people are not buying as much as you planned?
Changing industry pricing behavior
One challenge I see is when a customer is historically used to purchasing a certain way. Some prefer one-time upfront costs with nothing ongoing. Others prefer zero initial investment and just a recurring charge. Some industries have nuances of per user, per member, etc. that they have historically used to purchase products. Be aware of how your industry is used to buying and be careful trying to force a new method without first vetting the viability. A new pricing construct can be a breakthrough, but it also could be a hurdle your customers cannot easily overcome.
Fundamentally pricing should be based around the ROI and value your customer is receiving. The same solution can have different value to different customers. Find the customers that are getting the most value, and focus your pricing and messaging to target those customers to grow the business. Do not spend your time trying to win customers who don’t get value by playing with price. Even if you close the deal, they are more likely to churn when the value comes in question.
Price - reason or excuse
Sometimes sales are below expectations, and sales claims it is because the pricing is wrong. Maybe. But there is also a chance that is just an excuse and something bigger is wrong in the go-to-market strategy as it pertains to the product, value, message, or channel strategy. Don’t just take price as the reason without doing more digging and talking to customers to truly understand why.
There are lots of things you can do to iterate and tweak price. Early on, make lots of small tests to learn the best way to get going and then optimize as you get further down the road. As a resource, here are a few other ways to think about pricing.