New Product or Service Pricing
When preparing to launch a new product or service it is imperative that you get the price right the first time and that you base it on hard data from your marketplace; the value perceptions of the buyers, their willingness to pay, and expected price elasticity and demand curve. Any other method is guaranteed to render the wrong price – sometimes completely wrong, sometimes less so.
We recommend you begin this process early in the development phase as the hard marketplace data may affect your final product or service offering, bundling or un-bundling and how to position and market the offering. The data enables Atenga to recommend a pricing strategy that meets corporate objectives: maximizing market perpetration, targeted at certain market verticals, against certain competitors, designed to minimize internal cannibalization, or to maximize profitability.
Pricing Existing Product or Service
When the economy changes, the behavior of your customers changes. What they buy, how they buy and why they buy. You’ll see this in your business; what used to “work” doesn’t “work” any more. Or at least not as often or as well as it used to.
So it is during uncertain economical times, more than any other time, you need to base you pricing on hard data from the marketplace. Hard data on willingness to pay, price elasticity, decision-drivers for willingness to buy. You also need to know what bundles, unbundles, policies or service options will increase your marketplace’s willingness to buy and to pay.
So what is hard data? It is the result of anonymous research into your marketplace together with statistical analysis where the research population is large enough to provide statical significance results. Companies of course “know” from sales conversations what drives their customers’ buying decisions. But, when these drivers are quantified and qualified, a very different picture emerges. The anecdotes and unquantifiable data the vast major of companies rely on don’t cut it!
Product Life-cycle Pricing
Every product/service has a multi-pronged pricing lifecycle. The product/service is priced into the market to achieve a stated goal. As the elasticity changes, due to competitive pressures or similar products entering the market, the price is re-adjusted to its optimum price point based on the data. As the product matures a deprecating pricing model may be used. And finally, the product is priced out of the market.
This is a complex process and, to do it right, the process needs continual measurement and management. Atenga provides product lifecycle price management as a packaged service. This service can be applied to a particular product/service or across a portfolio of products/services.
So what results can you expect from Best Practice Pricing?
Overall better business results.
You company will understand the importance of pricing; the organization will think pricing all the time, will understand that even small price changes and small discounts will have profound effect on your business.
Hard data from your marketplace will drive many everyday business decisions and will replace anecdotes and hearsay captured in sales conversation. This will have an impact on the efficacy of how you serve your customers, and you will be able to serve them better.
By being superior to your peers on pricing, you will grow quicker, you will be more profitable and you will be more competitive; you will have more resources to develop new products or services, more resource to innovate, to serve you customer even better, more resources to market your company. It will become a self-reinforcing cycle.
The superior business results you gain from Best Practice Pricing will of course also lead to superior shareholder value.