Is the Price Right?
Price is the one component of the marketing mix that has a direct and straight path to the bottom line. Most of us never really know if our price is right. There are five big pushbacks when client start to implement a pricing action:
- “Our customers are just price sensitive and will not accept a price increase from us without looking at our competitors.”
- “If we raise our price, then competitors will go after our customers with a lower price.”
- “We could add more value, but even those customers who would appreciate increased value can’t raise their prices. So, we will end up just increasing their costs. They cant survive an increase in their costs. We’ll lose them!”
- “We don’t know any other customers who will give us new business.”
- “We’re in a commodity business. We can’t increase price. That’s just our reality.”
The Value of Market Analytics
Let’s take a deeper look at these pushbacks and shred them using real Market Analytics from the customers our clients target.
In the last 25 client pricing studies we have completed, an average of 31% of customers revealed themselves to be true price buyers. In one exercise, we asked respondents to rank a set of 5-6 value adds vs. 3 discounts. Those who ranked the discounts above the value adds were price buyers. Others were essentially value buyers the 69% who did not rank the discount over value.
In these same studies, we tested head-to-head competitive pricing scenarios. In every case, the majority of respondents chose the competitor with the higher value offering at reasonable price premiums over the lowest-priced, stripped-down option. Our interactive simulator, fueled by respondent data, lets our clients determine their optimal price based on the share and earnings they wanted to achieve. Invariably, prior beliefs about what is possible crumble in the face of optimal price.
Our studies defined the right value sets, the right buyer sets, and the right prices. Outcomes value buyers sought were uncovered to reveal well-articulated positionings.
Market Analytics studies capture data that characterizes both price and value buyers in a way that makes it possible to find them and tell them apart.
Value buyers react positively to value offerings and will buy once you give them what they value. These studies demonstrate the power of adding value when considering a pricing action. Adding value is the best way to get the price you need and deserve.