Frame Value from the Customer’s Perspective

by | Oct 23, 2009 | Quantify Customer Value, Uncategorized, Why LeveragePoint?

Your Price Metric Should Reflect How Your Customer Uses Your Solution To Create Value

One key to a successful pricing strategy is to use an appropriate frame of reference, one that resonates with your customer’s point of view. In other words, the price metric for your solution should align with how your customer gets value from your solution. Too many companies, especially in high-technology and healthcare offer bizarre pricing schemes that are based on the seller’s technology (server CPUs for example) that have nothing to do with how the buyer gets value.  In the industrial materials space, selling materials “by the ton” is going to hit a snag with customers who normally purchase “by the pound.”  And likely there will be an even bigger disconnect among customers who typically purchase the said materials “by the yard” or “by the day.”.

This may sound like a statement of the obvious, but it was a major topic of discussion among a group of executives gathered at the recent Mass High Tech Leadership Council unConference.

.Here are best practices suggested by the group:

  • Price against what the customer knows, especially with new products.
  • Make it easy for the customer to compare your price to a reference price.
  • Be sure you know what the real competitive alternatives are for the customer, especially for new products. Price depends on value – and value is always relative to something.
  • Give the customer a way to compare you to something else – don’t let the customer choose how to compare you.
  • Conduct customer buying surveys to understand how/why they spend their budgets – to understand how you are positioned and to uncover new opportunities.
  • Customers value predictability (and hate surprises) caused by a pricing strategy – especially with newer products. Customers like being able to budget for expenses. Therefore, be very transparent on pricing tiers, services etc.
  • Understand that your pricing is part of your service offering – design it around your customer’s needs and give them clear, transparent choices.

This is just the beginning of the conversation. Do you have any other suggestions for how to properly frame the unit of price in terms that are meaningful and actionable for the customer?  Do these best practices make sense?

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Ed Arnold
VP of Products
LeveragePoint Innovations

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