Changing of the Pricing Guards
Implementing a value-based pricing strategy is a wonderful idea but how do you make it happen? To get the buy-in necessary to kick off your business transformation, start by developing a story that makes it obvious why your organization would be better off by moving to a value-based pricing strategy.
Start by assessing your current pricing strategy. How are you pricing today and how have you priced historically? What are the short comings of the “status quo”? Compare this historical analysis with the value-based method you would like to implement. Demonstrate how a value-based strategy will be used to achieve company goals.
Are you seeking to grow margins? Maybe you want to grow revenue. Whatever you company is after, reveal how a value-based pricing approach will help you get there. The first step down any pricing transformation is buy-in. If you can successfully explain why implementing a value-based pricing strategy will be instrumental in moving your company towards their goals and targets, you should be in a pretty good position to get buy-ins.
If you have the time and budget, I would suggest doing some market research to validate your perceived value to customers and further establish your need for value-based pricing. Your product is only as valuable as your customers believe it is.
This data would aid in your proof of concept and will help you set your prices. If you don’t have the budget to do research, reach out to other internal teams. This type of market research may have been done by other teams such as development/innovation/marketing. Try to collaborate with these entities, and use any insights or data they have regarding customer perceptions and opinions of your product and /or your product versus the competition.
Ensure that you have a clear understanding of where your company wants to go and prove that a value-based pricing approach will get them there. Value-based pricing enables you to extract the maximum value for your products and helps to ensure no money gets left on the table, optimizing margin and revenue. Value-based pricing research can also reveal different market segments that have different willingness to pay and may lead you to adjust marketing or price to these varying segments (if this is executable). Knowing your segments and their willingness to pay can help grow volume and revenue.
Demonstrating how value-based pricing can address current challenges in pricing strategy as well as better position your company to achieve their goals should be a pretty impactful story. Getting pricing done right is a journey, not a destination. There will likely be pushback and challenges along the way when implementing a new pricing strategy, but don’t let that deter you. If you encounter a roadblock, figure out what motivated that challenge to your proposal then find a way to align their goals with your pricing vision.
If you are looking to jump start your pricing transformation, give the experts at Wiglaf Pricing a call!