Did you ever watch The Price Is Right? Sometimes product pricing can feel just like being on the game show. When you launch your product, you may as well consider the buzzer sounded because it’s almost impossible to significantly raise a price once it’s been set. If you set your price too high then the product won’t sell: you lose. If you set your price too low then you run the risk of missing out on significant revenues and your competitor might win instead.
To win this game, you want to choose the Right Price for long-term profitability.
Here are some tips to help you win big:
#1 – IT’S ALL ABOUT THE CUSTOMER
Get to know your customer. Really get to know them. Manifest an enthusiasm for who they are and what they need. Getting to know your customer will help you to establish which features of your product are most appealing to them and why. This can help in establishing marketing and product development strategies as well as help you understand how your customer values your product. When you know how they value products like yours - and their average budget - you begin to get a clearer idea of what they might be willing to spend. Figure out how your customers educate themselves about their purchases and where they prefer to get their product information. Ideal Buyer Profiles and Buyer Personas are great tools for making sense of the data you collect from this research. Taking the time to understand your customers and connect with them will help you in product pricing and other fronts.
#2 – KEEP YOUR FRIENDS CLOSE AND…
Well, competitors aren’t enemies, but it’s still a good idea to keep an eye on them. Being nosey is just part of doing business. Research your competitors and use them as reference points in your pricing strategy. How are they pricing offerings similar to yours? Are they ignoring features your customers crave? Leverage your customer data and Buyer Personas while conducting competitor research; figure out how your customers value your brand against competitors and what might motivate (or already has motivated) them to purchase from competitors.
#3 – KNOW YOUR LIMITS
It’s crucial to have a clear understanding of both the highest and lowest possible price points for your product. This is where all your research from implementing the first two tips will start to pay out. Use this data to establish the price elasticity of your product. Can you beat your competitors’ prices? Are customers willing to pay more for certain features? When you’ve done the research on customer preference and competitor activity it’s possible to create a simulation of the marketplace. This can help predict the effects of different pricing and product strategies and help you determine how to price your product.
It’s important to know your customers, competitors, and your limits when determining the best pricing strategy for your product. Taking time to do the research will help you win big in a competitive market. With these tips you’ll be on your way to setting the Right Price for your product!
If you like this post we recommend you check out our Software Pricing Strategy series.
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Topics: Pricing Strategy
