![]() Customer willingness to pay and price elasticity are two types of market analysis that help unveil how you are perceived in the marketplace and how your price should reflect that.Īnother input to value-based pricing is economic factors. Market research should be used to understand how your customers view your products, services, and overall brand. However, understanding competitor price alone doesn’t generate a complete value-based price. This information is then used as one input to set price. Businesses can collect competitor intel through industry reports, web scraping, sales feedback, or ongoing market research studies. This pricing strategy begins with understanding your position in the market versus competitors. Perceived Customer Value & Willingness to Pay.Value-based pricing considers market factors to determine price, including: Businesses that use differentiated pricing experience reduced risk and benefit from increased profits through optimizing customer expectations and opportunities. This pricing strategy is used when more granular pricing is needed, such as customer-product-specific pricing. Why use a differentiated pricing strategy? Segmenting customers into peer groups based on similar attributes allows you to assign a differentiated price based on the perceived value provided, reduce risk, and optimize profit.įor example, Figma offers different plans catered to different sizes and needs for user: The customers that were willing to pay a much higher price have now resulted in a lost opportunity. For customers that find your price too high, you risk losing their business. A one-size-fits-all pricing approach, or “peanut-butter spread” approach, will create a price that is not in line with customer expectations or willingness to pay. This approach allows for large-scale pricing actions with less risk. This pricing strategy also places similar-behaving customers into segments. In this scenario, a differentiated pricing strategy would consider the different customer and order attributes to determine a price that best reflects the value provided and the willingness to pay for each customer-product-order combination. Instead of having a singular one-size-fits-all price, this pricing method assigns a price based on the product, service, customer, and order attributes for a given scenario.Ĭonsider two different customers purchasing similar products: ![]() Differentiated Pricing StrategyĪlso referred to as segmentation-based pricing, differentiated pricing assigns a unique price to a specific customer purchasing a specific set of products or services. ![]() If your pricing strategy isn’t enabling you to meet your business goals, it may be time to reconsider your approach.īelow are 7 different pricing strategies that can help drive profit growth in your business. This means pricing can quickly become a profit center and augment a business’s ability to invest in other core initiatives. Pricing actions are incremental by nature, so the right pricing strategy or strategies for your business delivers compound returns over time. However, with this mindset, it’s easy for companies to overlook the importance of choosing a pricing strategy – both the methodology to set price and the underlying structure – that is best suited for business goals. Conceptually, establishing a lucrative price seems like it should be straightforward – bringing in more revenue than the costs your business incurs. Instead, underestimating or not acting on the complexity or uniqueness of your business leads to missed profit opportunities or profit loss.Ī price strategy is any methodology or process a business uses to determine the price for its products or services. Moreover, many businesses would benefit from leveraging multiple pricing strategies concurrently to optimize price. Even so, most companies do not invest enough time and resources into their pricing strategy. Pricing is one of the most powerful levers for growth in a business. ![]()
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