August 3, 2015

How do I create an optimum pricing strategy?

August 3, 2015

How do I create an optimum pricing strategy?

Stump the Strategist

Watch below as we answer:

Q: My subscription business teaches kids to read and spell. Up until now our pricing strategy has been to copy the competition, but we want to adapt. How should we work out the optimum pricing strategy?

  • Featured strategists are: 

    Ashton Bishop – Head of Strategy,
    Step Change

    Adam Long – General Manager, Step Change

    Dean Harris – Director and Founder,
    Brand Navigator                 

    Ewan Frith – Director, Good Egg Thinking

  • About Stump the Strategist:

    • Questions from the floor, answered live in nine minutes
    • It's opinion, not advice
    • Step Change charges clients for advice, Stump The Strategist is free

     

A:

  • Reaching the ideal price is not just about testing, but also influencing customers' perception of pricing. Subscription pricing allows you to approach the problem from two angles: time and price. $50 sounds expensive as a block sum. If that sum is spread out in weekly payments over a month, then suddenly it sounds more affordable and more valuable

  • Consider a number of different value propositions and test them across a segment of your market. Work out the optimal point to drive both volume and value for your business
  • Run a promotional activity, such as a Google Adwords campaign, for a limited time at a given price point. Check the analytics on how people interact with that

  • Remember, it's not about price – it's about value. Value is what you pay over what you get. What do you add beyond the price that tips the equation in your favour?

  • 3% to 7% of your audience isn't price sensitive. Offer these customers a premium product with an outrageous price. This will influence the perception around your standard product as customers believe they are receiving more value for less money

  • Use anchor points and relativity in your framing. For example, compare it to the cost of text books, schooling, or your daily cup of coffee

  • Try a decoy model. By giving customers two less favourable options, you can frame the choice you want them to make and influence their value perception. For example, an online version of the product for $60, a print version for $110, or a special offer of both for $110

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