Hirsh Goswamy, Vice President of Marketing at Livionex Inc. & Fellow at OnDeck.
Product pricing has been an age-old challenge for business leaders: How do you maximize revenue growth without alienating customers? Previously, leaders relied on traditional methods such as cost-plus pricing. However, newer strategies take a more dynamic approach to establishing the value of a product or service while balancing market competition, the nuanced demands of customers and more.
To help leaders who are curious about pricing, I turn to 11 members of Forbes Business Council E-Commerce, a community I am fortunate to lead, to share their top considerations for pricing strategy.
1. Your Buyer’s Purchasing Power
Have an understanding of your product needs according to the wants of your customer base. Each buyer has funds to allocate to certain goods or services. Knowing where the product fits—in necessary or luxury goods or something in between—as well as external factors such as economic environment and the sales region habits, will help leaders price their products accordingly. – Martina Seferovic, OIP Inc
2. Honesty About What Your Product Is
Product Managers often fail in being honest about what their product is. From a consumer’s perspective, do you have a product that is heavily cross-shopped with limited differentiation that will require significant marketing to compete? Or, does your product have a unique and recognizable value proposition with more price elasticity than the commoditized competitors? – Eric Maas, Fuelist Digital
3. An Understanding Of Your Market
The effective approach to determining your pricing depends on what you are selling. Small, consumable products are very different from high-end services, so you must understand your market before determining your model. An underlying principle that has always served me well is value-based pricing. What is this product or service worth to your customers? Once you know that, you can price things appropriately. – Simon Bedard, Exit Advisory Group
4. Authorized Spending
Leaders should definitely consider the authorized spending that business managers or consumers can make without the need for additional thought, approval or steps. In the beginning, for instance, most managers will easily be able to authorize $50,000 without management approval. Staying below this number speeds up sales and reduces friction. – Juliet Okafor, RevolutionCyber
5. An Understanding Of Where Your Brand Stands
To determine the appropriate price for your product, you must take a realistic approach when considering three factors: the competitive landscape in your industry or product line, the value propositions that your unique product is bringing to the industry, and how to position it. By understanding where your brand stands, you’ll have a clear direction on how to best distribute your product, promotion, placements and price! – Christian Brown, Glewee
6. The Elasticity Of Your Pricing Strategy
If you are pricing your product without looking left, right and center, then you’ll be in for a surprise. Checking out competitors for pricing, getting feedback from potential customers about the price they’re comfortable paying, and A/B testing are as crucial as setting up the final price of your products. They’ll give you a holistic view of how elastic your pricing strategy is. – Zaheer Dodhia, Logo Design
7. The Value You Bring
It all goes back to the value you can create for your customers. What problems are you helping them solve? How does your product help generate long-term growth for your customers? Not only will this encourage you to set a fair price, but it will also bring consistency to your sales pitch. – Jonathan Cherki, Contentsquare
8. Your Company’s Needs And Objectives
Analyzing your own company’s needs and objectives is the core step, as it is with every business choice. This includes some commercial soul-searching: What do you want your firm to contribute to the economy and world? This can entail adopting a conventional retail strategy, developing a service company mentality, or placing more emphasis on one-on-one interactions with your clients. – Thai Son Nguyen, SmartOSC
9. The Manufacturer’s Online Retail Price
Pricing online is so important because it is transparent to competitors on the same screen. There is no effort for customers to compare prices. Our first step is to review the manufacturer’s suggested retail price (MSRP) with the manufacturer’s website if they sell direct-to-consumer to ensure they maintain their own MSRP. A brand’s integrity is at risk if its retailers do not honor the MSRP. It is dangerous to participate in price wars on the internet. – Jennifer Coy, Beauty Care Choices
10. Conversations With Your Customers
If you already have a consumer base or audience, ask them! This can be done easily through Instagram, survey monkey, or even just phone calls. We need to be super in tune with the people we serve—less talking and more listening! Having conversations with our customers, or the customers we want, can be incredibly insightful. – Marya Khalil-Otto, VI Peel
11. Your Target Audience’s Willingness To Pay
By understanding the target audience’s willingness to pay, leaders can set a competitive price that reflects the value of their product while remaining affordable and attractive to customers. This can help increase sales, build customer loyalty and drive business growth. – Gaurav Kumar, Beyond Codes Inc
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