Pricing is incredibly important. It is what makes a company viable. It drives your near-term and long-term revenue and profit growth. It is a major factor in your valuation. Every company should focus on their pricing frequently.
Sometimes, there are urgent reasons to change pricing. Right after an acquisition or in preparation to be acquired, for instance. Or maybe market conditions changed rapidly – new competitors or competitors’ actions, quickly evolving technology (AI, anyone?).
In less urgent situations, companies typically undertake market research to adjust their pricing. Often with the help of a pricing consultant. These can be very valuable. You get new pricing which almost always boosts revenue and profit. The downsides are they are expensive, take months for research and analysis, and they are one and done. Your company didn’t really learn how to do it for the next time.
Here is a unique perspective. You don’t need more market research. You want to know about your buyers and customers, but you have people inside your company who know and understand your market. These could include salespeople, customer success teams, customer support, application engineers, product managers, marketers, and possibly even executives. They know your market.
What all of these people don’t know are the many frameworks around pricing. Most importantly, they don’t know how to articulate the value of your product or service to a colleague or a customer. When you can articulate value and know why one buyer gets more value than another, you are well on your way to making extremely profitable decisions.
How do you do this? Build a small team of people who know the market. People who used to work for your customers are great additions to the team. Then, start to build out a value table. Chapter 4 of my book Selling Value describes these in detail, but the basics of a value table are to think about your best features, the problems they solve, and the results (measured as KPIs in B2B) your customers want to achieve. Then, if you sell B2B, use business acumen to determine how much additional profit a customer would get if they improved that KPI.
The insights from creating value tables are amazing. You will find that some features you thought were valuable really aren’t. And others you downplayed actually have huge value. And it’s different for each customer. This knowledge helps you better define market segments, craft better packaging, and improve your pricing.
People inside your company probably know enough about your buyers. If only they knew how to use that information to make great pricing and business decisions. If you’d like some help, please reach out. This is exactly what we do.
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Tags: pricing, pricing foundations, pricing metrics, pricing skills, pricing strategy, pricing value, value, value table, value-based pricing
