Impact Pricing Blog

Two Ways to Grow Revenue

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There are only two ways your company can grow.  Win new customers and get more money from your current customers.  

I know, Captain Obvious.  But here is my question for you.  Do you think about these differently in your decision-making?  When you price a product, are you selling it to new or existing customers?  The answer is probably “both,” but which are you pricing for?  

New customers don’t know the value of your product.  They can only use perceived value, which depends on how well your marketing and sales teams can communicate it.  New customers are probably more price-sensitive because they haven’t worked with you and don’t have experience with your product. 

Existing customers, on the other hand, should be less price-sensitive.  They know and trust your company and some of your products.  When you are selling them a new product, you still have to rely on sales and marketing to communicate the value, but you start with an advantage: the relationship.  

The best situation is when you are selling the same thing to existing customers, like a subscription.  They no longer rely on perceived value.  Rather, they’ve experienced the real value of your product.  They know if your product is worth the price.  They know what you can do for them.  They were price-sensitive when you originally won them as a customer, but now much less so.  Furthermore, switching costs are likely high.  

A trash collection company I worked with would use aggressive pricing to win new customers.  Then, over the course of the next 10 years, they would consistently raise their prices.  Eventually, another company would win the business at a very low price and start the cycle over again.  This industry clearly thinks differently about new and existing customers.  

Back to the original question.  Are you thinking about your new and existing customers differently?  

Share your comments on the LinkedIn post.

Now, go make an impact!

Tags: pricing, value

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