Pricing Strategy Guide: 7 Types, Examples, & How to Choose

Pricing strategies refer to the processes and methodologies businesses use to set prices for their products and services. If pricing is how much you charge for ... ThePricingStrategyGuide:ChoosingPricingStrategiesThatGrow(notsink)YourBusiness ProfitWell Mar162021 Toomanybusinessessettheirpricingwithoutputtingmuchthoughtintoit.Thisisamistakecausingthemtoleavemoneyonthetablefromthebeginning.Thegoodnewsisthattakingthetimetogetyourproductpricingrightcanactasapowerfulgrowthlever. Ifyouoptimizeyourpricingstrategysothatmorepeoplearepayingahigheramount,you'llendupwithsignificantlymorerevenuethan abusinesswhotreatspricingmorepassively.Thissoundsobvious,butit'srareforbusinessestoputmucheffortintofindingthebestpricingstrategy. Thisguidewillcovereverythingyouneedtoknowaboutsettingapricingstrategythatworksforyourbusiness.  TableofContents:1.Definitionofpricing.2.Whatarepricingstrategies?3.Theimportanceofyourpricingstrategy.4.Top7pricingstrategies.5.3Pricingstrategyexamples6.Howtocreateawinningpricingstrategy.7.10pricingstrategytips.8.Pricingstrategiesfordifferentindustries.9.Nomorepriceguessing,justpricingthatworks10.PricingstrategiesFAQs. Definitionofpricing Pricingisdefinedastheamountofmoneythatyouchargeforyourproducts,butunderstandingitrequiresmuchmorethanthatsimpledefinition.Bakedintoyourpricingareindicatorstoyourpotentialcustomersabouthowmuchyouvalueyourbrand,product,andcustomers.It'soneofthefirstthingsthatcanpushacustomertowards,orawayfrom,buyingyourproduct.Assuch,itshouldbecalculatedwithcertainty.   Whatarepricingstrategies? Pricingstrategiesrefertotheprocessesandmethodologiesbusinessesusetosetpricesfortheirproductsandservices.Ifpricingishowmuchyouchargeforyourproducts,thenproductpricingstrategyishowyoudeterminewhatthatamountshouldbe.Therearedifferentpricingstrategiestochoosefrombutsomeofthemorecommonones include: Value-basedpricing Competitivepricing Priceskimming Cost-pluspricing Penetrationpricing Economypricing Dynamicpricing Pricingisanunderutilizedgrowthlever Manycompaniesfocusonacquisitiontogrowtheirbusiness,butstudieshaveshownthatsmallvariationsinpricingcanraiseorlowerrevenueby20-50%.Despitethat,evenamongFortune500companies,fewerthan5%havefunctionsdedicatedtosettingthebestpricepossible.There'samissedopportunityinthebusinessworldtoseeimmediategrowthforrelativelylittleeffort.  Becausemostbusinessesspendlessthan10hoursperyearthinkingaboutpricing,there'salotofuntappedgrowthpotentialinoptimizingwhatyoucharge.Infact,choosingthebestpricingmethodisamorepowerfulgrowthleverthancustomeracquisition.Insomecases,itcanbeupto7.5timesmorepowerfulthanacquisition.    Theimportanceofnailingyourpricingstrategy Havinganeffectivepricingstrategyhelpssolidifyyourpositionbybuildingtrustwithyourcustomers,aswellasmeetingyourbusinessgoals.Let'scompareandcontrastthemessagingthatastrongpricingstrategysendsinrelationtoaweakerone.   Awinningpricingstrategy:   Portraysvalue Thewordcheaphastwomeanings.Itcanmeanalowerprice,butitcanalsomeanpoorlymade.There'sareasonpeopleassociatecheaplypricedproductswithcheaplymadeones.Builtintothehigherpriceofaproductistheassumptionthatit'sofhighervalue. Convincescustomerstobuy  Ahighpricemayconveyvalue,butifthatpriceismorethanapotentialcustomeriswillingtopay,itwon'tmatter.Alowpricewillseemcheapandgetyourproductpassedover.Theidealpriceisonethatconvincespeopletopurchaseyourofferingoverthesimilarproductsthatyourcompetitorshavetooffer. Givesyourcustomersconfidenceinyourproduct  Ifhigher-pricedproductsportrayvalueandexclusivity,thentheoppositefollowsaswell.Pricesthataretoolowwillmakeitseemasthoughyourproductisn'twellmade. Aweakpricingstrategy:   Doesn'taccuratelyportraythevalueofyourproduct Ifyoubelieveyouhaveawinningproduct,andyoushouldifyouaresellingit,thenyouneedtoconvincecustomersofthat.Settingpricestoolowsendstheoppositemessage. Makescustomersfeeluncertainaboutbuying Justastherightpriceisonethatcustomers willpullthetriggeronquickly,apricethat'stoohighortoolowwillcausehesitation. Targetsthewrongcustomers Somecustomersprefervalue,andsomepreferluxury.Youhavetopriceyourproducttomatchthetypeofcustomeritistargetedtowards. Top7pricingstrategies Let'snowtakeacloserlookatthesevenmostcommonpricingstrategiesthatwereoutlinedabove.Clickonanyofthelinksbelowforamorein-depthguidetothatparticularpricingstrategy.   Value-basedpricing Withvalue-basedpricing,yousetyourpricesaccordingtowhatconsumersthinkyourproductisworth.We'rebigfansofthispricingstrategyforSaaSbusinesses. Competitivepricing Whenyouuseacompetitivepricingstrategy,you'resettingyourpricesbasedonwhatthecompetitionischarging.Thiscanbeagoodstrategyintherightcircumstances,suchasabusinessjuststartingout,butitdoesn'tleavealotofroomforgrowth. Priceskimming  Ifyousetyourpricesashighasthemarketwillpossiblytolerateandthenlowerthemovertime,you'llbeusingthepriceskimmingstrategy.Thegoalistoskimthetopoffthemarketandthelowerpricestoreacheveryoneelse.Withtherightproductitcanwork,butyoushouldbeverycautioususingit. Cost-pluspricing  Thisisoneofthesimplestpricingstrategies.Youjusttaketheproductproductioncost andaddacertainpercentagetoit.Whilesimple,itislessthanidealforanythingbutphysicalproducts. Penetrationpricing Inhighlycompetitivemarkets,itcanbehardfornewcompaniestogetafoothold.Onewaysomecompaniesattempttopushnewproductsisbyofferingpricesthataremuchlowerthanthecompetition.Thisispenetrationpricing.Whileitmaygetyoucustomersanddecentsalesvolume,you'llneedalotofthemandyou'llneedthemtobeveryloyaltostickaroundwhenthepriceincreases inthefuture. Economypricing  Thisstrategyispopularinthecommoditygoodssector.Thegoalistopriceaproductcheaperthanthecompetitionandmakethemoneybackwithincreasedvolume.Whileit'sagoodmethodtogetpeopletobuyyourgenericsoda,it'snotagreatfitforSaaSandsubscriptionbusinesses. Dynamicpricing  Insomeindustries,youcangetawaywithconstantlychangingyourpricestomatchthecurrentdemandfortheitem.Thisdoesn'tworkwellforsubscriptionandSaaSbusiness,becausecustomersexpectconsistentmonthlyoryearlyexpenses. 3Pricingstrategyexamples Real-worldpricingstrategyexamplesarethebestwayforabusinesstobetterunderstandtheabove-listedpricingstrategies.Evaluatingotherbusinesses'approachescanbeagoodstartingpointbutkeepinmindthattherightpricingstrategyisbasedonmath,marketresearch,andconsumerinsights.Fornow,let’slookatthepricingstrategyexamplesofsomeofthebiggestbrandsoftoday:   Streamingservices  HaveyounoticedthatyoupayroughlythesameamountforNetflix,AmazonPrimeVideo,Disney+,Hulu,andotherstreamingservices?That'sbecausethesecompanieshaveadoptedcompetitivepricing,oratleastaformofit,calledmarket-basedpricing. Salesforce WhenSalesforcefirstcameout,theyweretheonlyCRMinthecloud.(Itwasn'tevencalled'thecloud'backthen!)Armedwithground-breakingdeploymentandatargetcustomerofalargeenterprise,Salesforcecouldchargewhattheywanted.Later,afterthey'dgrown,theywereabletolowerpricessosmallbusinessescouldsignup.Thisisaclassicexampleofpriceskimming.  DollarShaveClub Atonetime,youcouldn'tturnonyourTVwithoutanadforDollarShaveClubtellingyouhowmuchcheapertheywerethanrazorsatthestore.Althoughanaggressivemarketingstrategy andadvertisinglikethatisunusualforthepricingmodel,theywereneverthelessemployingeconomypricing.Itworkedoutwellforthem.TheywereacquiredbyUnileverin2016forareported$1billion. Howtocreateawinningpricingstrategy Inthebeginning,theactualnumberyou'rechargingisn'tthatimportant. Therearesomeexceptions,butforthemostpart,youshouldfirstbefiguringouttherangeyou'rein:a$10product,$100product,$1kproduct,etc.Don'twastetimedebating$500vs.$505,becausethisdoesn'tmatterasmuchuntilyouhaveastrongerfoundationbeneathyou. Instead,understandingthefollowingismuchmoreimportant: Findingyourvaluemetric Settingyouridealcustomerprofilesandsegments Completing userresearch+experimentation Step1:Determineyourvaluemetric A“valuemetric”isessentiallywhatyouchargefor.Forexample:perseat,per1,000visits,perCPA,perGBused,pertransaction,etc. Ifyougeteverythingelsewronginpricing,butyougetyourvaluemetricright,you'lldook.It'sthatimportant.Partlybecauseitbakeslowerchurnandhigherexpansionrevenueintoyourmonetization. Apricingstrategybasedonavaluemetric(vs.atieredmonthlyfee)isimportantbecauseitallowsyoutomakesureyou'renotchargingalargecustomerthesameasyou'dchargeasmallcustomer. Ifyourememberyourhighschoolorcollegeeconomicsclass,theprofessorputapointonademandcurvefortheperfectpriceandsaid“therevenueafirmgetsistheareaunderthatpoint.”Theproblemhereis:whataboutallthatotherareaunderthecurve? You’remissingoutonthatrevenuebychargingaflatmonthlyfee. “Good,better,best”pricingstrategyisabitmoreadvantageous,becauseyouendupwiththreepointsonourtrustydemandcurve,andthusmorerevenuepotential.YouseethisproblemamongmanyeCommercebusinessesandretailerswhose productsareconstrainedbybeingphysicalgoods—thecarwiththebasicpackagevs.thecarwiththestereoandsunroofvs.thecarwitheverything.Insoftware,it’sthankfullydyingout,butyou’llstillseeitwithmass-marketproducts: Netflix,AdobeCreativeCloud,etc. Avaluemetric,however,allowsyoutohaveessentiallyinfinitepricepoints—maximizingyourrevenuepotential.Inpractice,you’llnevershowinfinitepricepointsonyourpricingpage,salesdeck,ormobileconversionpage,butyoumayhaveanewcustomercomeinatacertainlevelandthengrow.   Valuemetricsalsobakegrowthdirectlyintohowyouchargebecauseasusageortheamountofvaluereceivedgoesup(andthosearenotthesamething),thecustomerpaysmore.Iftheyendupusingorconsumingless,theypayless(andthusavoidchurning).Thisiswhycompaniesusingvaluemetricsaretypicallygrowingat doubletheratewithhalfthechurnand2xtheexpansionrevenue whencomparedtocompaniesthatchargeaflatfeeorwheretheonlydifferencebetweentheirpricingtiersarefeatures. Todetermineyourvaluemetric,thinkaboutthe idealessenceofvalueforyourproduct—whatvalueareyoudirectlyprovidingyourcustomer? InB2B,it'slikelygoingtobemoneysaved,revenuegained,timesaved,etc.InDTC,itmaybethejoyyoubringthem,fitnessachieved,increasedefficiency,etc.Obviously,wecan'tmeasureallofthese,butifyoucan, and yourcustomertrustsyourmeasurement(meaningyousayyousavedthem$100andtheyagreeyousavedthem$100),that’syourvaluemetric. Asanexample,theperfectvaluemetricforProfitWellRetain(ourchurnrecoveryproduct)ishowmuchchurnwerecoverforyou.Wecanmeasurethis,andourcustomersagreetothemeasurement,sowecanchargeonthataxis.Otherpurevaluemetricproductsinclude MainStreet,whichhandlesgovernmentpaperworktoautomaticallygetyoubacktaxcredits—youpayapercentageofthemoneysaved. Mostofyouwon'thaveapurevaluemetric,sothenextstepistofindaproxyforthatmetric.Takeforexample HubSpot’smarketingproduct.Theirpurevaluemetricistheamountofrevenuetheirtooldrivesforyourbusiness.ThisishardtomeasureandhardforthecustomertoagreetointermsofwhatpercentageofcreditHubSpotdeservesforrevenuefromablogpost.ProxiesforHubSpotarethingslikethenumberofcontacts,numberofvisits,numberofusers,etc. Tofindtherightproxymetric,youwanttocomeupwith5-10proxiesandthentalktoyourcustomersandprospects.You’lltypicallyfind1-2ofthesepricingmetricswillbemostpreferredamongstyourtargetcustomers.Youthenwanttomakesurethose1-2alsomakesensefromagrowthperspective.Yourlargercustomersshouldbeusing/gettingmoreofthemetric,whereasyoursmallercustomersshouldbeusing/gettinglessofthemetric.Youalsowanttomakesurethemetricencouragesretention. WhenwelookatHubSpot,iftheyweretoprimarilypriceon“numberofseats”,folkscouldsharealoginandHubSpotwouldn’tmakemuchmoremoneyonlargecustomersvs.small.Ironicallytheywouldn’tgetasmanypeopleinvestedin HubSpot,becausethere’dbefrictiontoaddingadditionalseats.Instead,iftheygiveunlimitedseatsandpricebasedon“numberofcontacts”there’sminimalfrictiontogettingasmanypeopleintoHubSpotaspossibletodoactivities(e.g.,blogposts,emailcampaigns,landingpages,etc.)thatthenproducecontacts. Theresult:HubSpot’smarketingproduct’svaluemetricis“contacts”,whichensuresgrowthisbakeddirectlyintohowtheymakemoney.Theusagedrivesthemetric,whichthereindrivesrevenue.Mostimportantlycustomerssmall,medium,andlargeareallpayingatthepointtheyseethevalueandthencangrow. Someotherexamples: Wistia chargesbythenumberofvideosorchannelsyouuse/have Zapier inventedtheconceptofzap(connectionofsoftware)andchargebasedontimetoconnect TheaterinBarcelonachargedbasedonthenumberoflaughs Husqvarna chargesbasedontimeforlawncareproductsvs.makingyoubuythem RollsRoyce chargespermileforairplaneengines.Theyowntheenginesontheplaneyouownanddoallthemaintenance.Coolmodel. FreshPatchchargesbasedontheamountofgrassyouwantpermonthforyourdog—yestheydelivergrasstoyoumonthly Asasidenote,youshouldstoppricingbasedonseatsforproductswhereeachseatdoesn’tprovideauniqueexperience.Forinstance,inaCRMifIlogintotheAEsittingnexttome’saccount,Ican’treallydomyworkbecauseI’monlyseeingtheirleadsandaccounts.Conversely,ifIlogintoourmarketingmanager’saccountinHubSpot,IcandoalltheworkIneed.Thus,forthelatter,seatsisnottherightvaluemetric. Per-seatpricingisarelicoftheperpetuallicenseerawhenwecouldn’tmeasureusageorvalueenoughwithinourproducts.We’rebeyondthatpoint,sousetheaboveasagoodlitmustest.   Step2:Determineyourcustomerprofilesandsegments Thesecondkeycomponentofyourpricingstrategyisdeterminingyourtargetsegmentandidealcustomerprofile.We'veallheardaboutpersonas,andyoumayberollingyoureyesattheconcept,butmostpersonasareuselessbecausetheyaren’tquantitativeenough.Whenusedproperly,quantifiedpersonasandsegmentsarebeautifultools.Theinformationneedstogobeyondjustcutenameslike“StartupSteve"withacuteavatar,andcutemeetingswherepeopletellyouthey’retargeting"developers." Togetquantifiedpersonas,youneedtopulloutaspreadsheet. Here’satemplate youcanuse. 1.Columns:Customerprofilesyou'retargeting Thesecantakemanyforms,buttheultimategoalistobeasspecificaspossiblesothatyounotonlyknowwhoyou’retargetingbuthowtomonetizeandretainthem.Pragmatically,youtypicallyseparatethesecustomerprofilesbasedonsizeorrole(orboth).Forexample,amarketingautomationproductmaytargetthefollowingprofiles: Marketingleaders(Directorandhigher)atcompanies$1Mto$10M Marketingleaders(Directorandhigher)atcompanies$10.01Mto$50M Marketingleaders(Directorandhigher)atcompanies$50.01Mto$100M Thepointisyoucan’tbeeverythingtoallpeopleandyouneedtounderstandwhoyou’retargetinginordertomakebetterdecisions. 2.Rows:Characteristicsofeachprofiletohelpyoudifferentiatebetweenthem Mostvaluedfeatures Leastvaluedfeatures Willingnesstopay Lifetimevalue(LTV) Customeracquisitioncosts(CAC) ...andanyothermetricorcategoryyouthinkcouldbeuseful Ifyou'rejuststartingoutoryoudon'thavesomeofthisdata,it’sfine.Stillfillitoutthoughwithyourhypotheses.Youknow something aboutyourcustomers. Next,youthenneedtovalidate(orinvalidate)themostpressinghypothesisinthatspreadsheetbasedonthedecisionsyou’regoingtomake.Ifyou'regoingtovalidateanewfeatureforaparticularsegment,thenthat'swhereyoushouldstart.Pricepointthebiggestquestion?Startbyresearchingthepricepointwitheachoftheseroles/segments. Ifyoudon'tknowwhoyourkeyroles/segmentsare,there'snowayinhellyou’llsetupanefficientgrowthflywheel,letaloneanoptimizedpricingstrategy.Personasactasaconstitutionwithinyourbusinesstocentralizeyourfocusandargumentsaboutdirection. Ifyoudon'tdosegmentandpersonaanalysis,youbetterbeabletoraiseatonofmoney.Iguaranteeyouthere'ssomepersonaorsegmentonsomevisiondocumentorinthateuphoricpartofyourentrepreneurialbrainthatiscompletelywrongforyourbusiness.Iseeitallthetime.EvenI—someonewhothinksaboutsegmentsandcustomerresearchallthetime—fallpreytobeinganabsoluteidiotwithwhoweshouldtarget. WhenwebuiltProfitWellMetrics(ourfreesubscriptionmetricstool)Ithoughtweweregeniuseswhoweregoingtobebillionaires.Turnsoutanalyticsproductsareterrible.Willingnesstopayforthemisterrible;retentionforthemisterrible;NPSisterrible.Everythingisjustterrible,mainlybecausecustomersdon'tappreciategraphsoratleastaren'twillingtopaymuchforthem.Whenwedidourresearchthisbecameobviousandputus18monthsaheadofourcompetitors,pushingustochangeupthepositioningoftheproducttofreemium,whichhasfueledourbusinesseversince(ohandourNPSis70,becausewemassivelyover-deliverafreeproductbetterthanthepaidcompetition). Neverunderestimatethepoweroffocusingonthecustomerthroughresearch.Youshouldnever,everjustdowhattheyask,butyouneedtobeananthropologistwhoknowsthembetterthananyoneelse.   Step3:Userresearch+experimentation Beyondyourvaluemetricandcoresegments,themonetizationgamebecomesextremelytacticalandresearch-based.Figuringoutyourpricepointinvolvesresearchingthosesegmentsandthenmakingdecisionsinthefield.Samewithdiscounting,add-on,andpackagingstrategies.Thepoint:monetizationisneverfinishedbecauseit’stheveryessenceoftranslatingyourvalueintoanoptimalframeworkforyourtargetcustomersegments. Practicallythisiswhyyoushouldbeexperimentingwithyourmonetizationeveryquarter.Experimentationcangettrickyandhaveafewquirks,butyou’llfindit’ssimilartomostgrowthframeworksoutthere(whichareallversionsofthescientificmethod). Here’sagoodprioritizationlistofwhatbusinessownersshouldattackinoptimizingtheirmonetizationstrategyoncetheyhavethecoresegmentsandvaluemetricfiguredout: Priority1:Foundational[seeabove] Corecustomersegments Valuemetrics Priority2:Core Orderofmagnitudepricepoint(areyoua$10productvs.a$500product) Positioningandvalueprops Packaging Priority3:Optimizations Add-onstrategy Specificpricepoint(areyoua$10productvs.a$11product) Pricelocalization/internationalization Discountingstrategy ContractTermoptimization Priority4:Growthaccelerators Freemium Marketexpansion(goingupordownmarket) Verticalexpansion Multi-Product Yourtrueorderofoperationswithmonetizationwillvary,butforthemostpart,allcompaniesshouldworkthroughthefoundationalandcoresectionsbeforemovingtotheoptimizationsandgrowthaccelerators.Ifyou’relargerorthere’safire,youmaystartwithanoptimization.Infact,thisissometimesagoodidea.Somethingmorescopedlike“pricelocalization”canhelpgetmomentum,beaforcingfunctiontocleanuptechandexperimentationstacks,andmitigatepoliticalconversations.Remember,monetizationissomethingthat’simportant,uncomfortable,andsomethingyoulikelydon’tknowmuchabout,soprogressisbetterthannothing.Startsmall.Youcan(andshould)alwaysdomore.     Rapid-firebonuspricingstrategyadvice⚡ Incaseyou'restillhungryformoretipsonnailingyourpricingstrategyandachievingmaximumprofitability,looknofurther.We'vegotyoucovered:   1.Youshouldlocalizeyourpricingtothecurrencyandwillingnesstopayoftheprospect'sregion Revenuepercustomeris30%higherwhenyoujustusethepropercurrencysymbol Havingdifferentpricepointsindifferentregionsincreasesrevenuepercustomerfurther,andisjustifiedbasedondifferentconsumerdemands indifferentregions   2.Freemiumisanacquisitionmodel,notapartofpricing Thinkoffreemiumasapremiumebookdrivingleads,notanotherpricingtier Don'tdofreemiumuntilyoutrulyunderstandhowtoconvertleadstocustomers,becauseyou’llendupincreasingnoiseorfalsepositiveswhenyou’retryingtofigureoutyoursegmentbeachheads.Thebestfolkswhodeployfreetypicallydon’timplementfreemiumuntiltwotothreeyearsintotheirbusiness.Theexceptionstothisnotionareifyouhaveaveryspecificneedornetworkeffect(eg.,marketplaces,socialnetworks,etc.)orifyouhaveatop50growthpersononyourteam. Tobeclear,I'mnotsayingDON’Tdofreemium.I'msayingit'sascalpel,notasledgehammerthatrequiresthought.Alotofpeopleendupreadingourarticlesonfreemiumandendupgoing,“Cool,let’sdofreemiumandwe’llbeaunicorn.”I’mbeingpragmaticinthatyouneedtorealizefreemiumisfantastic,butdoingfreemiumproperlytakesalotofeffortandnuance. PaiduserswhoconvertfromfreetendtohavehigherNPS,betterretention,andmuchlowerCAC.   3.Valuepropositionsmatterohsomuch InB2Bvaluepropositionscanswingwillingnesstopay±20%,inDTCit's±15%   4.Don'tdiscountover20% Insomeverticalsdiscountingover20%maybefine,butyou'relikelynotinoneofthem(althoughyoumaythinkyouare),butthesizeofthediscountalmostperfectlycorrelateswithhigherchurn.Largediscountsgetpeopletoconvert,buttheydon'tstickaround.   5.Forupgradestoannualdiscounts,don'tusepercentagesandtryoffers Percentagesdon'tworkaswellaswholedollaramountsfordiscounts(ie.,"onemonth"willworkbetterthan"Xpercentoff").Annualsseemuchlowerchurnrates.   6.Shouldyouendyourpricein9sor0s?Dependsonyourpricepoint Endingyourpricesin9sevokesadiscountbrand,makingthecustomerfeellikethey'regettingsomething.Endingin0evokesluxuryorpremium,makingthemfeellikethey'regettingahigh-endproduct.Studiesonthisfortechnologyproductsareinconclusive.Wehaveseenitincreaseconversioninlower-costproducts,butretentionisn'tasgoodwiththosecustomers.   7.Youshouldexperimentwithyourpricinginsomemannereveryquarter Thisdoesn'tmeanchangeyoushouldthepricepointeachquarter,butexperimentwithvariablecosts.Morechangescorrelatewithincreasingrevenuepercustomer.Likeallthings,focusingonsomethingmakesyouimproveit.   8.Casestudiesboostwillingnesstopayquiteabit Socialproofisimportant.Casestudiesthatofferproofofthehighqualityofyourproductscanboostwillingnesstopayby10-15%inbothB2BandinDTC.   9.Designhelpsboostwillingnesstopayby20% Thisgraphdidn'tlookthisway10yearsagowhendesigndidn'tdomuchforwillingnesstopay.Today,affinityforacompany'sdesigncanboostwillingnesstopayconsiderably.   10.Integrationsboostretentionandwillingnesstopay Themoreintegrationsacustomerisusing,typicallythehighertheirwillingnesstopayandthebettertheirretention.Iwouldn'tchargefortheintegrations,butI'dusethisasatooltogetpeoplehookedinandpayingmoreorbuyingdifferentadd-ons.     Pricingstrategiesfordifferentindustries Pricingstrategiesarenotonesizefitsall.Findingtheproperpricingstrategyisdependentonyourindustry,aswellasyourcompany'suniqueobjectives.Buttogiveyouanidea,we'velistedacoupleofindustriesandstrategiesthatarewellsuitedforeachother.    SaaS/Subscriptions ForSaaSandsubscription-based businesses,value-basedpricingisthewinnerhandsdown.Aslongasyourcustomersarewillingtopay,youcanchargemuchmorethanyourcompetitors. Becauseyourpriceisbasedonhowmuchcustomerswillspend,itisn'tartificiallyloweredlikeothermethodsthatfailtoaccountforthat.  B2B Wealsolikevalue-basedpricingforB2Bcompanies.Value-basedpricingrequiresyoutolookoutwardandunderstandyourcustomersbetter.Thisisgoodforfindingtheoptimalprice,butit'salsogoodforbuildingoptimalrelationshipsthatwillalsohelpgrowyourcompany.    Nomorepriceguessing,justpricingthatworks Accuratelypricingyourproductformaximumgrowthrequiresalotofmarketresearchandevenmoreexpertiseonhowtoconductandanalyzethatresearch.PriceIntelligentlycombinesouryearsofexperienceinthefieldwithpowerfulmachinelearningtoolstounderstandyourtargetcustomerbaseandwhatmakesthemtick.Weknowthedatatocollect,thequestionstoask,andthepeopletoaskthemof.Thisisimportantbecausebusinessesindifferentstagesofgrowthneeddifferentstrategiesforevaluatingpricing.Additionally,everybusinesshasauniquesetofpotentialsellingpointsandauniquetargetaudiencetopitchto. Youneedsomeoneinyourcornerwhoknowshowtoevaluatepricingoptionsforyourspecificbusinesses.Withourhelp,youcanbeconfidentthatyourpricingstrategyandchosenpricepointswillunlockgrowthleversatyourcompanythathavebeensittingidle,becausethey'llbetailoredtofindingandmaximizingthevaluepropositionsthatareuniquetoyourbusiness.      PricingstrategiesFAQs Whichpricingstrategyisbest?  Thisdependsonyourbusinessmodel.ForSaaSandsubscriptioncompanies,aswellasmanyothers,werecommendvalue-basedpricing.   Howdoyoudeterminethesellingpricesofaproduct? First,findapricingstrategythatfitswellwithyourbusinessmodelandproduct.Asyou'veseen,pricingstrategiesdiffer,buttheyallgiveclearinstructionsforhowtousethemtosetprices.   Whatisthesimplestpricingstrategy? Sinceyouonlyneedtoaddupthecosttomakeyourproductandaddapercentagetoit,cost-pluspricingisthesimplestformofpricingtouse.   Whatisapricingcurve? Apricingcurveisagraphthatshowsyouthenumberofpeoplewhoarewillingtopayagivenpriceforaproduct.   Whatarethe4majorpricingstrategies? Value-based,competition-based,cost-plus,anddynamicpricingareallmodelsthatareusedfrequently,dependingontheindustryandbusinessmodelinquestion. ByProfitWell Subscriptionsoftwarehelpingyouachievefasterrecurringrevenuegrowth. ProfitWell pricingstrategy Resources Share GetRecurupdates Jointhe18,000companiesfollowingthenextrelease. The3BestCustomerRetentionSoftwareTools Retentionisoneofthemostimportantelementsforyourbusiness.Ifyou’renotkeepingcustomerscomingback,thenyoucan’tgrowyourbusinesssustainably. ReadMore Acompactguidetopricingstrategy OnthisepisodeoftheB-side,Patrickprovidesyouwithacompactguidetopricingstrategy,completewithexamplesandbonusadvice. ReadMore Top10DTCMarketingStrategies&SuccessfulReal-worldExamples LearnaboutwhyyourbusinessismissingoutbynotimplementingaDTCmarketingstrategyandhowtogetitrighttosurvivethepandemicandbeyond. ReadMore WillingnesstoPay:WhatItReallyMeans&HowtoInfluenceIt Learnwhatwillingnesstopayreallymeansforyourbusinessandhowyoucaninfluenceittooptimizeyourpricingstrategy. ReadMore Subscriptionmarketinsightsyouwon'tfindanywhereelse. Subscribe AccessallthecontentRecurhastooffer,straightinyourinbox. Bysubscribing,youagreetoProfitWell'stermsofserviceandprivacypolicy.