When businesses price their products and services improperly, they endanger their potential for growth – and possibly even their prospects for survival. My guest, Stephen Plume, is an expert on pricing and so it was my great pleasure to sit down with him for a discussion on the importance of correct pricing (and the perils of incorrect pricing!)
Stephen shares insights from over 100 pricing projects, highlighting that even healthy, growing companies can capture more revenue and margin through strategic pricing. He advises early-stage companies to avoid wildly wrong pricing and suggests using fencing and layering strategies to offer differentiated pricing to various market segments. For established companies, he recommends planning for annual price increases and leveraging brand reputation to command higher prices. Stephen also stresses the need for clear, value-focused messaging in marketing to enhance willingness to pay.
Discussion points include:
- The significance of pricing in the early stages of a company, noting that pricing errors can set a precedent.
- The concept of “pricing is where your strategy meets the real world” and the potential consequences of mispricing.
- How pricing adjustments can significantly impact a company’s bottom line without additional costs.
- The concepts of pricing fencing and layering and how they allow companies to offer differentiated pricing to different segments.
- The importance of finding the right price for a specific ICP and understanding the implications of LTV on media spending.
- Why it’s wise to plan for price increases and communicate them to prospects and customers as part of the sales process.
- The need to understand the customer’s unit of value and how it should be linked to the pricing model.
- The importance of qualitative and quantitative research in understanding price sensitivity.
- The challenges of pricing AI-based products and the potential for outcomes-based pricing.
- The potential pitfalls of outcomes-based pricing, such as fluctuating revenue streams.
