The Value Pricing Chain Part 1

by | Nov 8, 2012 | Pricing, Product Marketing, Quantify Customer Value

Guest Post by Jerry Bernstein. This was originally published in the Aug 2012 edition of ‘The Pricing Advisor’

Many companies want to implement value pricing, but have had limited success in achieving their goal. Many attempts at value pricing fail because there is a broken link in the Value Pricing Process Chain, which consists of four key elements. Break a link and your pricing strategy will fail.

An understanding and application of value pricing principles should be at the foundation of any pricing activity. Many companies want to move to value pricing, but are unsure of how to proceed. The key is a clear understanding of the objective of value pricing.

The objective of the Value Pricing Chain is to create congruency between your:

  • Brand promise – the result customers can expect from doing business with you
  • Marketing messages – designed to attract customers who value what you offer enough to pay a premium to get it
  • Sales scripts – designed to lead prospects and customers through the calculation of value in dollars and cents
  • Pricing – designed to reflect the value to that particular market segment and offer budget options

Obviously there are a variety of factors that influence each of these four elements of the value pricing objective. Let’s take a quick look at what they are and how they influence value pricing.

Value Pricing Chain Link 1: Identifying Value

Value research incorporates a variety of techniques designed to achieve one goal – to help you understand what it is that your customers value enough to pay a premium to get that value.

Successful techniques include:

  • Identifying your most profitable markets
  • Interviewing your most profitable customers
  • Interviewing the salespeople who generate the highest profits
  • Analyzing your most profitable offerings to ascertain what value customers see in them

Using multiple avenues to research value affords you the opportunity to limit bias that might otherwise creep into the research. By limiting your research to the most profitable markets, customers, salespeople and products/services, you focus your attention on those areas of your operation that afford the greatest opportunity for revenue and profit growth.

The insights you gain from this research will help you develop greater clarity about what your brand promise should be, who your ideal customer is, what it is that they value and how much they value it. All of these are essential to strengthening link 2 – Attracting value buyers.

Link 2: Attracting value buyers

Once you’ve identified value from your customers’ perspective it’s much easier to craft marketing messages that reinforce your brand promise and attract buyers who are willing to pay a premium for your offerings.

Unfortunately, it’s equally easy to lose focus and develop marketing messages that accomplish neither of those goals. Some of the things that cause us to lose this focus are:

  • The desire to try a ‘creative’ approach – something new and fresh. There’s nothing wrong with new and fresh as long as it reinforces the brand and communicates the value that interests the customer
  • Responding to a competitors’ marketing claims/pricing strategy. Whenever we react to a competitor, we lose sight of the customer. That’s when things get really ugly – for us and our customers
  • Failing to monitor and adapt to customers’ changing needs/interests. As human beings we’re wired to want more whenever our immediate needs are satisfied. Understanding this and monitoring those changing needs is essential. Interestingly the core value rarely changes, just the form it takes
  • Attracting value buyers is essential, but it’s not enough to close the sale. That brings us to Link 3 – Selling value

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