The right pricing strategy will create customer loyalty and long-term profitability. The wrong pricing strategy will send your customers running and drive your profits down.
Here's how to set pricing so that your customers will keep coming back again and again, and help you realize long-term profitability.
Focus on value pricing
Value pricing is not discount pricing. Rather, it is pricing your product or service based upon how much the target customer believes it to be worth. Or, as Price Intelligently puts it: “Customers don't care how much something cost you to make or your competitors, they care how much value they're receiving at a particular price.”
Determining the value your target customer places on your product or service takes time and research (a lot of it). Because of this, many companies shy away from value pricing. However, by focusing on value pricing, you will increase your long-term profitability, gain customers, and develop a following of loyal customers.
Neil Baron wrote a great article for Fast Company on how a dead squirrel taught him about value pricing. The long and short of it, according to Baron: “Many companies worry about the commoditization of their offerings and their inability to justify premium pricing — but if you figure out how to take care of your customers' 'dead squirrels,' you're golden.”
Make pricing flexible
After taking the time to research and determine your value price, set the price with a modicum of flexibility. A little flexibility will go a long way in terms of being able to adjust to customer's needs and the needs of your company.
Pricing should be fair, direct, and easy to understand both internally and externally. Complex and unfair pricing not only brings a host of challenges to your company, it also discourages customers and undermines your company's credibility.
These three strategies will keep your customers happy and your sales humming along.