Lecture 11 - Five Point Pricing Plan to apply to your pricing project
Directions: Use this step-by-step approach to determine which pricing approach is best for your own pricing project
Step 1: Analyze the Current Situation
Tips:
Is your current pricing driving discounts or no discounts?
If either too many/too high discounts or no discounts at all,
it means it is time to review pricing.
What is the feedback from the Sales organization or
Customers?
Has demand or ‘Willingness to Pay’ changed?
Has the product changed or competitor pricing or product
changed?
Especially if you’ve added product enhancements or
updates, you may want to think about the price point. In
the broader market, if the competitor has met or exceeded
your product, pay attention to feedback that your product
might be too expensive.
Step 2: Determine the Pricing Approach
Tips:
Identify the best pricing strategy or combined pricing
strategies you will work with. Will you begin with one
strategy for launch and then evolve into another?
Identify the most suitable price model that supports the
strategy, market dynamics and financial goals
Step 3: Build Pricing using Three Pricing Building Blocks
Tips:
Packaging
Choose from:
Good/Better/Best
Build-a-Bundle
Use Case Packaging
One bundle Fits all
Price Metric
Choose from:
per user
per usage (kwh, mileage, storage, clicks, hits, views,
downloads, per entree, per side, per bottle, etc.)
time based metrics (per month, per year, per active
session)
Price Per Unit
Choose from:
a-la-carte one price per one unit (i.e. one price per
hamburger, one price per french fry, one price per drink)
one price per bundle of things (i.e. value meal gets
assigned a price per value meal which contains a bundle of
things)
Tiered volume discounts (optional)
Choose from: one price per unit or a tiered price where the
price per unit decreases as the unit volume purchased
increases
Step 4: Implement Pricing for Revenue Generation
Tips:
What teams need to be members of the Implementation
Squad?
Choose from: Product manager, Sales Enablement/Sales, IT
(for CPQ), Revenue Recognition, Legal
What is the responsibility for each team?
What is the end date and time to completion for each
team?
Step 5: Measure and Modify for Success
Phase 1: Immediately after launch:
What is the initial feedback 4 weeks to 3 months after
launch?
Are customers unbundling the packaging or adding
something to the packaging every time it is ordered?
Is a particular customer type or segment discounting more
than other segments?
Has the sales cycle extended?
Phase 2: 6 months after launch:
Has your profit margin improved? reached initial goals? Are
costs still covered?
Is there equilibrium between supply and demand? Is there
an increase in demand that should impact your price?
Has the volume of sales increased or decreased?
Is usage/consumption healthy and steadily increasing or has
it stagnated?
Are customers buying complete bundles or asking to
unbundle?
Phase 3: Annual Review
How are your customer satisfaction scores? Have they
improved or declined because of price-to-value
recognition?
Do customers see the value in your offering? If yes, this is a
sign the pricing aligns to what you offer.
Has anything changed with respect to the offering? For
example, improved features added through the year
warranting a higher price?
Market Landscape - Has anything changed in the macro
environment that requires a price review? This could
include changes to competitor offerings, market conditions,
inflation, supply and demand.
Tips: