Pricing people have a unique perspective, but it’s a perspective that could dramatically help your entire company if more people adopt it. All competent pricing experts use value-based pricing, which means they focus on value.
To optimally price a product, you need to understand how much your buyers value your product. Their perception of your product’s value is the reason customers buy. So great pricing people dive deeply into what your buyers value. When they have a strong grasp of customer perceived value, they confidently set prices that will win.
But wait! Discerning customer perceived value when setting pricing is too late in the process. Marketing and salespeople are responsible for communicating to your buyers. If the price you can charge is directly related to how much value your buyers think they will get, then marketing and sales should be communicating this value clearly and consistently. But most don’t. Most instead talk about your product and your features. In fact, most marketing and sales teams that I run into don’t even know how customers perceive value.
My recommendation: pricing people should work with marketing and sales to document what value means to different types of buyers. It’s not easy, but it’s important.
But wait! Teaching marketing and sales to communicate value in a way that resonates deeply with your buyers is STILL too late in the process. Product management and development define and build your products and features. How do they know what to build? They likely build new features based on customer requests, the squeaky wheel. They may prioritize features that are fun for them. What they SHOULD prioritize are the features that buyers value. After all, marketing and sales can only communicate the value that exists. It’s up to product teams to create the items that deliver the value.
My recommendation: pricing people should work with product teams to prioritize the features on the roadmap based on what delivers the most value to your customers. They should also work together to package features into different offers, think good, better, best, to have the right products to fit the right budgets of your market.
OK, suppose you don’t have a pricing team to drive this. That’s fine. This post isn’t really about pricing, it’s about value. Teach marketing, sales, product management, development, and yes even executives to base most of their decisions on your buyers’ perceived value. After all, the reason your company exists is because it delivers value to customers.
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Tags: pricing, pricing foundation, pricing skills, value
