I recently shared the key elements that make for an effective pricing strategy and who should be leading this. Yet actually taking the steps toward creating an effective pricing strategy can be daunting.
Emotions can rear their heads and lead decisions astray. Opinions can undermine what should be a calculated, informed decision. And, most importantly, your leadership team should be able to use this strategy to replicate the process for any product updates or new solutions into the future.
I am here to show you the approach that will lead you and your team to a pricing strategy that serves your buyers, reduces future churn and supports your revenue performance. Are you ready to set the groundwork?
THE 5 GOALS OF PRICING
In order to realize success in the end, your leadership team must first identify which goal your exercise will help fulfill. Five common pricing goals include:
- Alignment with Financial Plans and Strategy: Defined in specific revenue targets, revenue mix, growth rates and margin targets over time.
- Growth: Defined in terms of revenue, market share, market penetration, units sold, and customers retained or acquired.
- Retention: Defined typically by revenue or customer numbers, but may also include rates by geography, industry or other market / product segment.
- Pull-Through or Cross-sell / Up-sell: Defined by attachment rates and cross-sell or up-sell rates.
- Product Selection: Targets associated with selecting one solution versus another (typically considered in replacement, end-of-life or transition strategy scenarios).
6 KEY PRICING INPUTS TO GATHER
Before any decisions start to form, your team needs the right input and data to inform them. These six pricing inputs all play a key role in the final pricing strategy. And when they are all considered and incorporated, your organization will ultimately reduce significant pricing churn into the future.
- Product Cost: For example fixed cost and variable cost, such as data storage, maintenance and access
- Competitive Environment: Such as pricing level and pricing approach
- Financial Strategy and Financial Plan: Like revenue mix by product segment / category (this impacts packaging and bundling considerations)
- Differentiated Value Proposition: Such as assessed level of differentiation in the marketplace
- Product Strategy and Defined Roadmap: For example growth dimension (what are the goals and tactics?) and identifying products that will pull this product into a sale or vice-a-versa
- Market and Environment Trends: Like regulatory and compliance drivers, as well as overall economic market trends
UNLOCK YOUR ULTIMATE PRICING POWER
A B2B Leader’s Guide to Pricing Strategy Workbook provides B2B leadership with the comprehensive four key pricing principles and detailed six steps that will lead you to a successful pricing strategy and outcomes. Download the guide for the complete framework.