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D4CLS - Pricing Case Study

THE WHY?

Pricing will:

  • Determine the success of a business’ financial performance

  • Create perception of quality and positioning amongst clients

  • Cause responses from competitors

  • Drive the value add of products and services

  • Impact how people can be rewarded

  • Create or erode shareholder value

  • Recognise a 1% increase in price can lead to a 10% increase in profits

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THE HOW?

  • Pricing strategies evolve and respond 

  • They take into account many different factors

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THE WHAT?

  • The approach loosely follows 3 main pathways

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VALUE BASED PRICING

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  • Requires an understanding of the benefits provided to each customer (gain creators and pain relievers)

  • Differentiates the value delivered to different customers or customer groups (buyer personas)

  • Focuses on ‘Worth’ to the customer and what motivates them

  • Seeks the equilibrium position where revenue to the business is maximised at a level the customer is just willing to pay

  • Recognises ‘worth’ and ‘willingness to pay’ will change over time and in different conditions

  • Is dynamic and evolves

  • Works effectively when there is a clear USP and differentiation

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  • Requires a detailed understanding of the competition alternatives and substitutes

  • Cuts the tie to costs involved in delivering the product or services; without removing the need to understand the margins involved

  • Is not limited by competition-based pricing, but benchmarks the impact of differentiation and USPs

  • Will help drive quality, through improvement in the provision and delivery of the product or service differentiators

  • Requires more time and resources to get optimise

  • Will improve following a test and learn approach

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VALUE ADDED PRICING WILL BE

MOST EFFECTIVE WHEN:

  • The purchasing decision is emotionally driven

  • There is scarcity involved

  • There is a driving need to be fulfilled

  • The differentiation of the product or service is communicated and understood

  • There is a clear opportunity cost to the provider

  • The marketing and positioning support the pricing

  • The willingness to pay is greater than the current price available

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