What value does your product provide? It isn’t in a list of features it’s in the benefits (often defined in emotional terms) that your product provides to your customers.Understanding the value that users derive from the product, including how they quantify the value and when they experience it, should Does the customer get to go home earlier at night? Does she not worry about her work so much? If you sell security software to an IT manager who is then able to manage the software more easily and work shorter hours, then the value to her may be very high. Now, think of your product and the problem it solves or what it provides to the customer. The petting zoo is most likely using cost-plus based pricing, when it could charge a much higher amount because the value of that particular moment is very high for parents. Okay, what was that worth? $5? $10? You’re going to show this picture at her wedding reception 20 years from now, right? $100? The petting zoo charges you 25 cents. Then there is the amazing value you get from watching your child grinning as she feeds the goats. From a pricing perspective, there is the cost of the goat food - about two cents. You put a quarter in the goat food dispenser. You take a small child to a petting zoo, and she wants to feed the goats. Here’s a simple value-based pricing example. If you get stuck, bring in a pricing expert. Then you test it with various audiences to see what happens when customers are faced with a buying decision at that price. A general rule is that you break down each piece of the additional value that you provide over and above today’s solutions and then calculate what the total adds up to. Determining value-based pricing can be complex. The value-based pricing strategy focuses on what the product is worth to customers. This is not the best product pricing strategy. This internal method of focusing on pricing doesn’t really take into account what the value is to the customer, but it’s a way to ensure the profit that you desire for each unit of the product that is sold. Common Product Pricing Strategies – Choose Wisely Cost PlusĬalculate what a product costs then add a markup. For low cost brands, like Walmart, the product pricing strategy indicates that you keep your price low and sell on volume. For example, does your company create luxury products with a high-end brand? If so, product pricing strategy almost dictates that you set your price very high to convey the fact that your brand is very exclusive and that not everyone can afford it. In this scenario, pricing is a natural outcome of the discussion, not a starting point. Strategy turns pricing into a deliberate process in which the company strategy dictates both the set of product features, the value customers associate with them and the brand. You will be much more successful if you use product pricing strategies as a starting point. The truth is that product pricing isn’t about just pricing your product but the strategy involved. Ok, maybe that’s being cavalier about a topic which makes the difference between a profitable product and one that doesn’t quite hit the mark in the market. Sometimes setting a price seems so hard that you just want to put a dart board filled with different prices up on the wall and see what number you hit. Pricing strategies may include cost-plus and value-based pricing. Strategy turns pricing into a deliberate process in which the company strategy dictates both the set of product features, and the value customers associate with them.
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