There are 3 main pricing strategies, and you can create variations.[describe each] Go to neutral when you can’t use either skimming or penetration.Transition: the next perspective we want to look at is what I call “pricing drivers”.
Price is one of the 4Ps (anyone unfamiliar with that concept?)In marketing, we generally choose our positioning on one of the 4 – usually product features. We overlook the other possibilities.The price we choose – low or high – makes a statement and that statement has to be considered as part of the overall brand and value proposition.Transition: let’s look at pricing strategy next.
Here’s a great way to figure it out for a B2B offering; you could structure a similar drill-down for B2C but including emotional value. This is best done directly with existing customers in an interview setting.1.First, understand how the customer’s business makes money – what’s their business model?2. Then, get specific about how the department you’re selling to plays a role in the business operations – are they a cost center or a revenue center?3. Drill down again to the specific processes used in that department that your solution impacts and what role your solution plays – hopefully it’s a major role!4. Then ask about the impact of your offering – what results are they expecting, and how will they measure them?Now you have the heart of what we call ‘value proposition’. The next two steps set you up for competitive positioning.You drill down into the criteria the customer used to compare solutions (not necessarily competitors!). Then you ask them to compare your solution to the next best solution and point out strengths and weaknesses. Transition: When you understand and can quantify VALUE, price becomes a lot clearer. The last challenge, however, is to put price in the larger context of economic conditions.
Addressing economic conditions demands flexibility from every company, but the flexibility has to happen on two fronts: pricing, and – more importantly - the product offering itself.Keep the relationship between price and value pretty steady! Transition: What other questions have we not addressed? Here are some that I run into regularly with clients.