With just under a month to 2019 we have looked at different market trends, spoken with customers and partners, and read the latest in pricing literature, in order to find trends around how best-performing companies are approaching pricing in 2019.
Here are 5 trends in pricing.
#1: From Guesswork to Data-Driven Pricing Insights
Price points are still very often the outcome of guesswork, or doing-what-we-always-do approaches. A full 88% of all companies admit to that their price determination process is at least partially based on guesswork. But this is about to change: with the emergence of affordable price research solutions such as PriceBeam as well as general investments in analytical solutions, companies will be better at making decisions based on hard market facts about customers and their willingness-to-pay. When solid pricing insights can be gained through market research for as little as $5000, there is a stronger financial incentive to getting prices right, and not losing millions in wrong or sub-optimal pricing.
#2: Pricing Psychology and Willingness-to-Pay
Why has Apple launched a phone costing up to $1499? Or what made you buy a larger cup of coffee last time you visited Starbucks? Pricing psychology and consumer behaviour is playing an increasing role in the marketing team's toolbox and can help finding opportunities within:
1) Getting more value out of customers through bundling and portfolio optimization, by steering customers to more premium offerings.
2) Exploit differences in willingness-to-pay by segmenting offerings
3) Cross-sell better and more through portfolio pricing considerations
#3: Dynamic Pricing growing in importance
Industries such as airlines and hotels have long applied dynamic pricing, where the actual price offered and paid varies with a number of factors, ultimately being set dynamically. However, a series of other industries are looking at adapting similar techniques to set a price that is adapted to individual (where legal) and the time of purchase. This means that e.g. e-commerce sites may update their prices several times per week or even per day, retailers may adjust their prices according to demand, shelf life, etc (or to sell off old stocks though food waste apps such as Too Good to Go). A retailer like Amazon adjusts millions of price points every week. But also more traditional businesses are experimenting with dynamic pricing, to reflect variations in demand or restrictions on supply.
#4: New Product Pricing: from pricing as an afterthought to integral part
Pricing used to be an after thought in many New Product Development teams. This is changing rapidly as price research is becoming "democratized" (more affordable and easier to use) with services such as PriceBeam. When price research is easily available within days and a costs below $10K, it is not only easy but also highly recommended to look at customers' willingness-to from the very beginning of product development. (Check out our upcoming webinar about this topic: https://info.pricebeam.com/webinar-pricing-in-new-product-development)
#5: Digital pricing:
Many industries are being transformed by digitalization these years. Even very traditional business-to-business industries see new business models emerging through digitalization (for a great book about the topic, see Stephan Liozu's book: https://www.amazon.co.uk/Monetizing-Data-Practical-Roadmap-Framing/dp/1945815043). But new business models also mean news of pricing and new ways of competing. If going from a traditional sell-product to service-based-subscription, pricing is suddenly a key driver with all its benefits but also challenges and pitfalls. Therefore, digital pricing is growing in importance in the pricing and marketing teams and will continue to do so in 2019.