In my previous post in this series I discussed differentiation as a key factor in pricing educational products. The basic idea was that it is difficult to set and get the prices you want if your product is not perceived as substantially different from the other options available to your customers.
In this post, I’ll take a look at price variation, the practice of varying the effective price of your offerings based on factors that come into play during the purchase cycle.
Variation recognizes that the value perception of your products changes from customer to customer, from time to time, and according to the context in which a purchase is made. By varying prices effectively, you can strike a balance between a customer’s price sensitivity and the level of value you deliver.
In short: you provide options. Doing this ensures that you will attract as many customers as possible at the maximum price point for each customer.
Establishing and Managing Your Value Continuum
The first step in managing price variation is to understand how value changes across your portfolio of products. We use what call the Value Ramp as a simple but powerful tool for visualizing the “value continuum” your organization offers.
Differentiation + Variation = Optimization
To wrap up, the core message of this two-part series is that if you are able to differentiate your offerings as much as possible from other options and then provide those offerings at a variety of price-value levels, you will strike a balance between sales volume and price that maximizes your net margins.
Even for nonprofit organizations, achieving this sort of price optimization is nothing to shrug at: net margins can be reinvested in the organization to fund new initiatives or to support programs that are unlikely to ever be profitable.
One final, important note: optimization is an ideal. It is something to strive for, but really it is difficult, if not impossible, ever to be certain you have achieved it. No organization has perfect market knowledge, and even if it did, circumstances change too rapidly for that knowledge to remain perfect for long. Nonetheless, continual efforts to differentiate your offerings and provide a variety of price-value options are certain to improve the overall performance of your education business.
Read complete article here: