Customers increasingly pay attention to price as a decision aid. So one might think that pricing has a high priority in companies. Unfortunately, that is not the case. While functions such as communication are completely over-emphasised, pricing leads a shadowy existence. Yet the effect of pricing is far greater than other instruments in the company. In the following, we present our 5 pricing recommendations.
1st recommendation
Establish customer-centric price determination: prices can be determined on the basis of costs, competition and customers’ willingness to pay. While determination via costs and competition is relatively simple, these types of determination do not allow a deeper understanding of the value perception by customers. But which elements influence the price perception how strongly is important information for systematic steering in the company. For offering development, communication and sales, it is enormously helpful to understand which elements of the offering have the greatest influence on customers’ willingness to pay. Through this knowledge, decisions can be optimally aligned to customers’ value perception, and perhaps even different segments can be addressed in a differentiated way. So customer-centric price determination helps not only in finding the optimal price, but also in developing the offerings further, differentiating the communication activities, and achieving success in sales.
2nd recommendation
Establish competencies for price measurement: customer-centric price determination presupposes that your company has competencies in the area of price measurement. 99% of companies have no competencies in this area. So there is a huge opportunity for you to differentiate your company in the competition on the basis of these competencies. And this is now no longer so difficult. There are numerous software applications for carrying out a choice-based conjoint analysis (CBC), Van Westendorp or Gabor-Granger survey. The application and implementation are well documented. The software solutions calculate the results automatically and present them comprehensibly. We now find that most of the theses in our master’s programme have customer-centric price measurement as their topic. Jump on the train and be a big step ahead of your competition. Whoever understands customers best has the greatest chances of success.
3rd recommendation
Establish a clear price position and effective price differentiation: if you are able to measure customers’ willingness to pay, you gain greater certainty in optimally determining a price positioning. Here, people often think only in the categories of cheap and expensive. But price positioning means the fine positioning: how exactly do you position your company compared with your relevant competitors? And, just as important, what are the arguments, or differentiating factors, for a higher price? Building on the fine positioning, it is important to check whether price differentiation is possible and to what extent. Here, the results of customer-centric price measurement help you determine the individual price points for each target group.
4th recommendation
A clear system in the discount system: if you have followed the first 3 of our 5 pricing recommendations, it would be a great pity to destroy all the work through a chaotic discount system. So the discount system should also be critically reviewed. From the perspective of customer centricity, it is important to reconcile the freedom for the individual salesperson with the added value of uniform specifications. Try to keep the number of discount levels as low as possible. Here, discounts should above all be geared towards customer loyalty. If exceptional discounts are granted, this must be clearly marked for the customers. Many companies grant discounts without disclosing the actual costs to the customers.
5th recommendation
Continuous further development of pricing competencies: customer experience management and communication take up such a large place in public discussion. Yet the fewest companies manage to systematically improve their pricing competencies. Usually there is no pricing champion in the company. The sales team also has hardly any competencies in this area. The introduction of customer-centric pricing commits you to improving the pricing competencies in your company every year. Price controlling has a high importance here.
Conclusion on our 5 pricing recommendations
We hear everywhere and always that customers increasingly look at price and that this presents a high challenge for companies. What surprises us is that hardly any company builds or expands pricing competencies. Customer surveys using the Van Westendorp method or a choice-based conjoint (CBC) are, thanks to digitalisation, no longer rocket-science activities. Every company can use these methods. Customer-centric pricing helps not only in determining the price, but is a solid basis for decisions in offering development, communication and sales. The results can offer added value in many places in the company. Our concluding conclusion on the 5 pricing recommendations: customer-centric pricing enables certainty in decision-making, systematic learning over time, and greater chances for differentiation in the competition. The result: more growth and profit.
