Communicating a price effectively is as important, if not more, as setting your company´s overall pricing strategy. It is an activity that should support you´re chosen pricing strategy, as this is essential to how much profit a company makes.
Businesses need to have some sort of guidance on how to communicate price to their clients, customers and even to their own partners and employees on a frequent basis. Knowing how to communicate your set price is as invaluable as setting the price for your product or service. Understanding buyer psychology is important when communicating a price. Price tends to be communicated poorly because businesses understand customers' desire for clarity and certainty as a way of demanding a low price for a particular product or service. However, since price is one of the components of value, it is important to communicate this effectively, as if customers believe they’re getting value for money, they will remain loyal despite price increases.
Here are seven tips for businesses so that they can improve their price communication methods.
Price and cost are two different things
Generally speaking, customers are not interested in the hours put into making a product or service. Customers are concerned with the value they are getting from a product, which comes in the form of a solution to a problem. This solution can be something like saving money, reducing risk, or the product can make some part of a customer's life easier. If a customer doesn't feel as though they are getting high value for the product then they will be more resistant to the price of the product.
Therefore, it is essential to avoid mentioning commodity and/or material costs, instead, mention the customer benefits. For example, place importance on customer service, high quality of your products or services, and new and improved product features.
Examine the willingness to pay of customers and clients
As mentioned above, customers and clients are willing to pay for value. Willingness to pay measures a buyer's motivation to purchase a product and it also measures the maximum purchase price for a particular customer. The price a customer is willing to pay for a product or service directly correlates with their perception of the value being communication. This perception of value is influenced by factors such as branding and value propostions. Businesses can improve their understanding of their customers' willingness to pay by being empathetic towards their aims and requirements for certain products and services.
Be consistent with the communicated price
Companies spend a lot of time and effort building a reputation that helps them establish themselves as experts in a particular industry. A solid reputation is associated with attracting new clients and this reputation is dependent upon a company being consistent with their pricing approach. A lack of consistency with pricing leads can undermine the value proposition that a company has created. If a company has promoted its product or service to target a high value segment of the market, then the company needs to match that with a price that matches its targets.
Be aware of different types of buyers
Even though companies are usually consistent with the way they communicate the price of their products, it doesn't mean they won't encounter a wide range of customers. These different customers may be loyal to a particular company or the customer may be looking for the best deal money can buy.
It is important to get a good understanding of value and how it is perceived different types of customers, as this enables companies to prepare accordingly and to convincingly communicate your product or services value to that audience.
Place emphasis on clarity
Customers are interested in the value they are getting for a product and this also means that they are also interested in the different components that make up a price of a product. Companies need to break down a product and outline the different parts of a product to justify its price point.
Increase the value perception
In order to for customers to understand the value of the work that a company does, that company needs to explain and justify how their product or business is different and better than what their competitors offer. The company also needs to communicate the benefits that a customer will receive by purchasing their product or service.
Companies should articulate the benefits of the product/ services they´re offering to their stakeholders. Describing the benefits, a potential client will receive instead of the features of the product, translates into results provided instead of solely focusing on facts. The following questions are essential to take into account when communicating the values of the product you´re offering:
What is the customer looking for/ what do they want to do?
Was in it for my customers?
What is the purpose of my product or service?
Why are the features of my product / service better than my competitors?
Communicate potential price changes
The price that a company provides for its product or service is the one that the customer pays. Changes in price occur for a variety of reasons but these changes need to be communicated to customers quickly and clearly. If a company chooses to change the price of its product or service, that product or service needs to be reframed. Failure to do so can result in customer backlash. They key to gaining loyal customers Is to create trust. Therefore, creating openness and being as transparent as possible with your customers is essential. This includes informing clients about price increases as soon as you can as this will prove trustworthiness and strengthen the relationship between your clients and your sales team.