By Michael Briggin
“Our pricing isn’t getting us enough revenue.”
“We need to make our services more affordable.”
“Our clients need more flexibility.”
“Competition is taking too much of the market share.”
No matter what the concern is, instituting the right pricing strategy for your products or services can be the most challenging part of running an organization. However, the right price for your offerings is contingent on having a deep understanding of your target market.
Here’s how you can add more focus to your efforts in getting the right price to translate into revenue:
Know What Pricing Strategy Choice Works Best For You
Choose but choose wisely. All pricing strategies should be laser focused on being practical for your target market and tapping into the sentiment of your customers.
If you’re providing services that focus on value that your customers get out of purchasing them, value-based pricing is ideal.
If you want to try setting up prices that are similar to your competitors, competitive pricing can work if you are just starting off. However, if your business is in growth mode and is planning for expansion, this pricing strategy may not be the best long-term strategy.
If you’re selling using an inventory-based accounting system for your goods (mainly physical goods), a cost-plus pricing option allows flexibility. This is where you can add a percentage on top of the unit price that’s been purchased so you can increase the revenue possibilities.
If you want to bring your customers to your direction when it’s hard to win them over with the same prices as your competitors, penetration pricing allows you to price your products and services substantially lower so you can provide value at a more affordable cost. One challenge with this is that you’ll need to find ways to keep your customers loyal beyond the incentives.
If you want to aim for an increase in volume of sales by pricing your product cheaper than your competition, economy pricing works particularly well if you’re in the commodity goods sector. If you’re a SaaS or subscription-based organization, this strategy is less likely to be effective.
If your target market is hot and you want to tap into it by profiting off of market pricing to meet the current demand, dynamic pricing works best in this situation. If you’re selling SaaS services or subscription-based programs, using this pricing option will likely raise red flags for customers as monthly and yearly expenses have to be planned for.
Analyze And Determine Your Value Metric
It’s important to be open-minded with choices for your customers if they want to consider your product or service.
By offering a variety of cost options based on value, it’s possible to expand your base of customers so they represent a diverse number of organizations.
Do Plenty Of User Research And Experimenting
It’s better to know your customer well and how to tap into their interests with enough understanding of what they’re looking for.
Experiment often with different pricing each quarter so you can prepare your three-month revenue projections with more to work with. Knowing what is hit or miss is important as it gives you a better guide on how to be more focused with reaching your target market.
Be Wise With Discounts
Any temporary reduction in prices can be a good incentive to bring in new customers as well as retaining them for repeat business.
When considering discounts, be cautious when offering them at a certain price. A reasonably lower-priced discount in the range of 10% – 20% is less risky than a higher-priced discount in the 40-60% range.