Communication is key in any comprehensive price management setup. Price and Value Communication is how you communicate with the customers, and communication and training is what makes the difference between convinced sales people, who deliver value conviction to the customers, and sales people who are indifferent and not able to defend the company's prices.
Price research can help in price and value communication in a number of ways:
- Understand what customers value: Not all customers understand or accept the brilliant thinking taking place in the engineering team or the finance department. In other words, they value different things that the benefits you price for. This is bad in itself, but is also expanded by communication of the wrong benefits. Use price research to understand what benefits and features customers value, and then adjust price communication accordingly.
- Adjust communication to what resonates with customers: when launching new products, or changing existing product concepts, it is often overlooked how to communicate well about the pricing side. What concepts do customers value? Where are they willing to pay a premium versus what type of arguments simply get ignored? Using price research such as PriceBeam's Comparative Willingness-to-Pay research allows you to test different concepts and product ideas against each other, and understand what resonates best with the customers.
- Identify premium customer segments willing to pay a higher price: The first step is to use price research across multiple segments, it is easy to identify who is willing to pay a higher price. That is already highly valuable insight, as it allows for a differentiated approach in terms of communication or product configuration across customer segments. A second research step could then be to investigate what makes each segment tick, i.e. what features and benefits they appreciate the most. Very often we find that even for the same product or service, what customers value varies quite a lot in different customer segments. Some customer segments may appreciate a competitive price the most. Others service. Others again flexibility in how to configure or use the product. Others again value soft values such as risk mitigation or branding the most. Research can identify all of that.
- Instill conviction into customer-facing staff: a sales person who is convinced that the price she is communicating is fair and acceptable, is a far superior sales person to the one who has internal (and sometimes external) doubts about the value delivered versus the price charged. So equipping the sales team with pricing research and actual facts about what the market values can make a tremendous difference in getting pricing well communicated, and in the end the ability to achieve higher prices.
- Implement price increases successfully: along similar lines to sales team conviction, knowledge about what customers are willing to pay for a given product or service, combined with insights into what value drivers matter the most, overall and per customer segment, allows for a much more powerful price increase implementation. Knowing where you will find the least resistance to price increases or what features to highlight to get existing or new customer segments to accept the price makes a huge difference in how much you can increases prices with, or how much you may have to discount back where you find the hardest resistance.
- Continuous feedback on value-driver communication: As with many things in business, insights and data can of course become obsolete over time. When implementing value-based pricing, it is recommended to also budget and plan for a continuous stream of price research, so you stay on top of customers' willingness-to-pay and insights into what they value/don't value/feel is overpriced now even if it wasn't before.
Getting price and value communication right can often mean millions of dollars in additional revenue and profits compared to getting it wrong. Yet still, most companies tend to neglect the communication side of pricing, or lack the additional enhancements that price research can bring.