Pricing is not a set-it-and-forget-it element of a business. Rather, it requires ongoing attention and adjustment.
If your business shows any of the following signs, it is very much ready for a different pricing outlook and approach.
- No pricing changes in years: Competitor offerings and customer preferences are ever-changing and pricing models and price points that worked five years ago are unlikely to be effective today. Don’t navigate today’s business environment with an outdated map; if your pricing strategy hasn’t been updated in a while, it is definitely the right to time to reassess your pricing.
- Selling on price and not value: If your sales team is finding customers to be only focused on price, it might be time to reevaluate your pricing strategy. Your pricing should align with the value you provide, and your sales team should be able to articulate that value confidently. If they’re struggling, it’s a sign that the internal and customer views on your value prop are not aligned (i.e., sales think customers care about a, b ,c, features and services wherease customers actually want p, q, and r). The biggest casualty of this misalignment ends up being your average sales price resulting in avoidable revenue leaks.
- Frequent discounting: While discounts and promotions can be effective, relying on them too often to attract customers is a sign that your regular pricing may not be competitive. Constant discounting can erode your brand value and your margins and send mixed messages (price very often signals value) to your customers.
- Complicated and inconsistent pricing: If your customers are constantly questioning your pricing or seem confused by it, it’s a sign that your pricing strategy or pricing model may be too complex. Pricebooks with hundreds or thousands of price points can be a nightmare both for sales and for your customers (all it takes is 10 price tiers across 3 products, 3 customer segments, and 3 channels to get to 270 price points). Additionally, inconsistency in pricing across different channels or customer segments can also lead to confusion and a loss of trust. Simplicity is key. Your pricing should be clear and consistent and not leave customers scratching their heads.
Reconsidering your pricing strategy is not a sign of failure but a sign of pricing wisdom and adaptability. It’s about recognizing that the business landscape is dynamic so must be your pricing strategy.
If any of the above signs resonate with you, don’t be afraid to reassess, recalibrate, and reinvigorate your pricing strategy. Your top and bottom lines will thank you for it.