Create a Pricing Game Plan
Every Company Should Have a Multi-Price Strategy
Reaping a company's pricing windfall involves creating a multi-price strategy to offer a handful of prices and plans. To avoid confusing customers, don't offer too many options. These are good rules of thumb to follow when creating a multi-price strategy:
- Always set a value based price.
- There is a fair chance of implementing pick-a-plan strategy (one to two tactics).
- Always practice differential pricing (two to three tactics).
- It is highly likely that good, better, and best versions that are designed to capture different customer valuations can be offered (two to three tactics).
- There is a good chance of being able to offer targeted product versions to meet specific customer needs (one to three tactics).
Companies should think of their potential customer base as a giant jigsaw puzzle. Each new pricing tactic adds another customer segment piece to the puzzle. Normal Normans buy at full price (value-based price), Discount Davids are added by offering 10% off on Tuesday promotions (valuation), Non-committal Nancys come for leases (pricing plans), and High-end Harrys buy premium versions (product needs). Employing differential pricing, versioning, and pick-a-plan pricing tactics adds the pricing-related segments necessary to complete a company's potential customer puzzle.
By offering choices to meet diverse needs, a multi-price strategy serves the largest number of customers. A multi-price strategy also provides options for customers to reveal their true valuations of a product. Price sensitive customers purchase lower quality versions, wait for end-of-season discounts, and redeem coupons. Those with higher valuations purchase immediately when a new product is released, select premium versions, and buy at fashionable retail boutiques.