Price is an expression of value.
Customers associate the value of your product with your pricing. It is the value-math all customers do.
How you price should help illustrate the individual uniqueness of your product.
Essentially, pricing should help customers answer the question, “Is [add your product here] worth it?”
Focus on value
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You can benefit from this uniqueness by designing your prices on what customers really think your product should be worth. By implementing value-based pricing into your strategy, you will reach closer to what your customers are willing to pay and can help you understand what your customers want from your product. This strategy may raise your prices above your competitors; signaling to the market that this value is linked to your product’s uniqueness.
Now don’t just raise your prices to make your products unique without having a strong grasp of your value drivers. When Kanye released a $120 plain white t-shirt, he was able to sell-out because his brand and exclusivity are core value drivers for the product.
Your customers must believe – or hold the perception – that your product is worth the price. When value-based pricing is done correctly, there is greater alignment between your customer, your value, and your price.
One great example of value-based pricing came from a web-based service called If This Then That (IFTTT). IFTTT, a tool enabling users to trigger and connect multiple web services such as Gmail and Instagram, offered customers the ability to set their own prices for their paid Pro-version web-based service.
The customers who choose higher prices signal value for the service – whether it be through the benefits of the services or through a more altruistic desire to keep the service going. This is also a reflection – and test – for IFTTT on what their customers are truly willing to pay when given the choice.
Create uniqueness for the customers who value it
Remember, you’re in charge (or at least can influence perception). You have the ability to design your prices. Changing your price strategy is a great way to find a different market segment that is more interested in your product. Do this by lowering or raising prices or even by offering a payment plan to make a luxury product more accessible.
One way to find and address your target market is by using Customer Rings.
Customer Rings are micro-segments that pinpoint customer preferences, perceptions, value drivers, and more. Think of Customer Rings as concentric circles. Your core circle are your loyalists. As you move further away from the core, these segments are likely to be more price sensitive. This price sensitivity can be persuaded towards your product or service if you develop a unique pricing strategy that catches their attention. Assessing what part of the market needs or wants the benefits of what you offer them will help you determine the value of your product or service.
If you find that your product is needed by a segment with a lower income, you may decide to lower your prices to reach those customers. A lower price could be what makes your product unique. That’s a strategic decision.
Take for example the iPhone SE. Apple realized that in order to reach customers in the outer circles of their Customer Rings, they recognized a more affordable phone was a value driver, and influenced the willingness-to-pay. In order to offer lower prices, the SE model was made of plastic. This also maintained differentiation from their premium priced phones. However, Apple generously marketed this product as being “lightweight”, making the product unique enough to be sought out by consumers in their outer rings.
Differentiate price design to enhance product uniqueness
Change it up!
Your pricing signals your value proposition and shapes consumer perceptions of your brand. Three ways companies have recently been using price to create product uniqueness is:
- Create a unique way to sell your product. This can be digital-only sales channels or buy now, but pay later.
- Revolutionize your pricing. Help your product stand out from competitors and against industry “norms”. Recently, many SaaS companies have decided to offer their products for free and use pop-ups and other advertising tools as their main source of revenue.
- Change the model. Another strategy companies have been using is changing the model. One example of this strategy is the rise of subscription services. More and more companies are adopting new models that include tiered levels of pricing. Netflix has long been a pioneer and leader of this model.
Netflix has three different subscription packages: $8.99 for Basic, $13.99 for Standard, and $17.99 for Premium. In order to differentiate offers and prices (latest price increase on October 29, 2020), Netflix created different price packages that made specific benefits accessible on different tiers.
Taking a page our of the Netflix playbook, you can also decide what features and fences to use that could be made even more valuable.
One of Netflix’s top competitors, Disney Plus also tried creating product uniqueness by using pricing. They offered their own premium plan with the benefit of watching the live action movie Mulan months before general release. This way, Disney Plus gave subscribers the option of whether or not the premium package had enough benefit to purchase. Making your pricing unique will draw attention to your product allowing your customers to reassess the value and benefits of what you’re offering them.
Building an differentiated product or services is challenging. Having customers identify or perceive the difference can be difficult especially for those operating in crowded markets.
When designed thoughtfully and strategically, pricing can be used to enhance your product’s uniqueness, but reframing how customers understand the product.
This take insights, design and strategic execution.
Leverage all the tools available to you – including pricing – to make your product standout and win the customers – and revenue growth – you need to help your company grow.
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