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Pricing Strategy Simplified | Strategic Pricing Solutions

Setting pricing strategies can be complicated, but doing it well is essential to the success of your business.  In Wikipedia, you can find 23 different pricing models listed along with 9 laws of price sensitivity and consumer psychology.  Many companies consider that seeming complexity, and decide they would prefer to simply figure out their costs and add a margin.   They just don’t want to tackle that complexity.  However, the companies that do it well simplify their pricing strategies to making some fundamental choices about where they will compete and how they will win.  They ignore the rest of the noise until those basic choices have been made, and then make sure their pricing decisions are aligned with those strategic choices.

Prior to developing a pricing strategy, a company must establish the business strategy.  The leadership team must answer the same questions – “Where will we compete and how will we win?”  More specifically, that means identifying which market segments they want to go after, and determining how to beat their competitors (win more customers), and then allocating resources to those segments and those capabilities.  The business strategies must not be simple statements of objectives like, “we will grow organically with existing customers and add new products.”  Instead the strategies should identify which specific segments and customer needs the company will target, what features are likely to be of sufficient benefit to attract a winning share of customers, and which capabilities are likely to enable the company to deliver those features to those customers.  When those questions are answered, it should be much less complicated to set the pricing strategies consistent with the overall business strategies.

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Pricing Strategy Simplified.