Pricing 101 strategies collectively provide a useful benchmark or starting point when it comes to setting prices for your business’s products and services. But they are just that, a starting point.
When people talk about pricing, the focus is usually on cost and margins, or about competitors’ pricing and their positioning. But all this has to do with finding the base price and helps to set fairly basic limits, so that businesses remain above cost price, for example.
The value is in value-based pricing – the price you believe customers are willing to pay, based on the benefits your business offers them. Value-based pricing can help you get away from cost-plus and competitor-driven ‘me-too’ pricing, but there’s always the challenge of making sure you price accurately enough to positively impact top line.
You have to make sure you do not price too high and find yourself out of the market or too low and miss the opportunity for more revenue, all while asking a fair price for products and services, aligned with their perceived value.
An experienced salesperson may feel he or she has a pretty good idea what an individual customer may be willing to pay. Yet relying solely on instinct and experience cannot account for all variables. Even the most expert, experienced salesperson may miss the pricing sweet spot.
That’s why we were delighted when Frost & Sullivan recognized PriceLenz as a way to effectively manage pricing strategies in real time. A way of empowering sales teams to understand the impact of discounts and variable price points on the likelihood of a successful deal. A way that helps salespeople understand how close each price point is to maximizing revenue.
Frost & Sullivan analyze hundreds of companies which provide solutions in business intelligence and analytics. So quite naturally, we were thrilled they chose PriceLenz to demonstrate price optimization.
Value-based pricing strategies can pay off
In the video clip below, Rufus Connell of Frost & Sullivan explains how businesses can get away from cost-plus pricing and can focus more on value-based pricing.
We particularly liked how Rufus highlighted its ease-of-use. You don’t have to be a data scientist to use PriceLenz. A little complexity is fine at the top end of the market, where large enterprises may employ IT and analytics experts on the data science team. But to make it workable for the mid-market and especially small businesses, we designed PriceLenz so salespeople can derive maximum analytical value, fast, and without having a flight plan at their side.
As Rufus points out, it pays off to price based on value, and price optimization can finally be an opportunity for businesses of any size.
Do you have a value-based pricing strategy in place to preserve brand value? Has your business seized its revenue potential? Feel free to leave a comment below to let us know.
You can select the following link to learn more about value-based pricing on Wikipedia.