Answers to 3 Pricing Questions
Hi!
I’m still working towards building my very own pricing course for the new year and I’m still collecting sign-ups for interest when the BETA opens up.
You can register your interest here by filling in these four questions.
A lot of the things that folks have mentioned they are ready to learn in a pricing course may be on your mind, so let me highlight a few more pricing ideas this week:
When do you change your price?
This depends on your research. You should be doing regular research in your market including things like Net Promoter Score and using a pricing survey to gauge where your pricing sits in your market.
Perception is the key idea to keep in mind here.
Is the perception around your product changing? Do people feel they are getting a bargain? Do they feel they are not getting the value they feel they should?
This is a roundabout way of saying, the right time to change your price depends on what your research says, what the perception of your product or service is, and, if you are using value based pricing, what the particular customer feels the value is.
What kinds of research help in pricing?
I’ve shared that I like to use the Van Westendorp pricing survey here before.
Why?
Because it is simple.
Not perfect, but it gives you a lot of information with a little bit of effort.
It is four questions:
When does the item cost too much for you to consider?
When does it become too cheap for you to consider?
When does it start to become so high that you start thinking it is too expensive, but not out of the question?
At what price do you start thinking that it is a good value?
That simple.
When you plot out the data, you’ll typically see a nice egg in the middle that gives you the pricing parameters to work within.
I also like to use post-purchase perception surveys as well.
You can also use experimentation and conjoint studies.
The best form of a survey depends on your organization and budget, but a good starting point is the Van Westdorp survey because anyone can do it and it can open the door to some more developed form of surveys.
Does competitor set matter in pricing?
This one jams up folks a lot because it has a lot less impact than you might imagine.
I talked to a bunch of sports marketing students recently and they asked this question in the form of:
“If the baseball team in our town is charging X, how can we justify Y?”
I get the angle that question comes from, but it assumes that folks are comparing things in a like-to-like manner and that’s why studying perceptions matters.
In making a buying decision, people are factoring in a lot of different variables when they make their decisions like:
Day of the week
Perception of value
What the item is being used for
Pain that the challenge being solved for is causing and the solution will relieve.
We can go on and on.
This is why pricing becomes an art and science because two people may face the same challenge and perceive the value differently, meaning that the different data points will throw off your pricing logic.
Another point against weighing your competition’s pricing too heavily is that you are giving them credit for being better or worse marketers and price setters without understanding their segmentation, their positioning, and their targeting. You are judging their decisions without knowing their objectives and goals.
You can’t really do it well.
So, in understanding your pricing, the best comparison to make is with yourself and what your customers perceive to be valuable.
Not what you think they find valuable elsewhere.
Again, let me know what you are thinking around pricing and do register your interest if you haven’t already.
Dave