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Customer-Centricity Value Based Pricing

Aug, 23 2021 in Articles, Business, Sales

People often think that value-based pricing (or I would rather say – customer-based pricing) is very difficult and can apply to very technical and breakthrough products or solutions. Is it really so?

Let me then ask you – what is the price for shall bottom of…..mineral water? Can there be anything more “basic”? Well, it is not that simple as you can think. How much are you prepared to pay for the exact same bottle of mineral water in a supermarket, convenience store, gas station, vending machine, or restaurant? Yes, you know this well – the price difference between those points of experience could be several dollars per bottle. There is a reason for that – the price depends on the customer’s specific pain points. And the baseline for this: you need to segment your customers in order to understand them well (please read one of my earlier posts, which refers to the importance of segmentation).

Value/ customer-based pricing can apply to any product or service in virtually any industry! And it is not that difficult either!

But keep it simple and as practical as you can!

Here are several recommendations as how to get started and put customer-based pricing into real life:

  1. Focus on single segment

Start with one segment. Identify buying personas and try to understand the best you can their unique, specific pain points.

If you operate in multiple segments – then you have to define your price per each segment. This is not a one size fits all exercise!

2. Compare with next best alternative

Your customers have freedom of choice. You need to understand what they would do if your product or service is not available. Where would they go to? What alternative product and from what vendor would they likely buy? Or perhaps they won’t buy anything at all, changing their processes instead? You are not alone in the marketplace – understand available alternatives and the competitive landscape.

3. Understand your unique feature

Products and services available to customers in the marketplace could be very complex and sophisticated. The good (though very challenging if you’re serious about it) thing is that you don’t need to look at every single feature your product or service has. You need to identify the unique one, which clearly and understandably differentiate you from the next best available alternative. You need to find “just” this one, which makes the difference for your customers.

4. Give a price tag to your unique feature

Yes, this step is inevitable and yes, you can make some mistakes. But don’t think that the longer you analyze, slice and dice your data you will get a better result. Do combine different research methods to validate your hypothesis. Try on one side to play with e.g. conjoint analysis (but don’t necessarily look at your historical data; try to set you free from your history and legacy) and run extensive customer focus groups interviewing. You would be surprised what valuable input and insights you will get from them.

5. Be flexible

As I said above – you won’t be perfect. Be ready that some customers will most likely come back to you to negotiate. Make sure you don’t forget about this when updating your selling process or setting up your CPQ.

6. Enable your sales force

Your product or service won’t sell by itself. Once you have selected your segments, understand your customer’s pain points, identified your key differentiator, and put your dollar value to the one, fixed your CRM and CPQ – address your own sales force and your channel partners. You need to have appropriate sales enablement in place, sometimes you need to change few salespeople or replace some of your business partners, and please don’t forget about supporting your efforts with motivation systems that will help you to reach your goals.

Companies try strategies to harness subscription sales as recurring revenue is a fantastic direction to take in order to produce long-term sustainable and profitable growth. However, many companies struggle as they failed with their customer-based pricing. Customer-based pricing is paramount to scale! Don’t be afraid, it is simpler than you think! Good luck!

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Customer-Centricity The importance of customer segmentation

Aug, 23 2021 in Business, Sales

When I was a child, my parents who tried to take a good care of me and my brother were trying to take us to experience the nature a lot. One of our joint family activities, especially during early autumn were trips to the woods to enjoy mushroom picking. I guess it was less about mushrooms and more about spending couple of hours together in a quiet and beautiful surroundings. However when it comes to the mushrooms – I’ve learn from them that not every mushroom is a healthy one, that you need to know how and where to spot the specific types, what time of the year and type of the woods is good for one type and not as friendly for another one and that normally when you spot one mushroom – try to look around for more as they normally grow in pairs…

It is very much the same about Customer-Centricity, which is as I have said not exactly the same as to deliver the same outstanding experience to every single customer of yours.

One should really spend a lot of time first to understand:

  • Who are the right (healthy) customers for the business?
  • How to identify them in 3-4 most important verticals?
  • How do they create the value in those verticals?
  • What are the distinctive personas to understand?
  • How to cluster them so you can scale up at some point?
  • Etc.

Customer-Centricity is not only about delivering outstanding experience to strategically selected Customers – it is very much about enabling value creation for the customer.

That is so important that instead of trumpeting around how customer-centric your company is – you really focus on those verticals, customer types and personas you are able to analyze as deeply as possible, so they understand how we do help them to create extra value. As Customer- Centricity is not (at its core) about how many customers your business is able to sell your product to – it is much more about with what and how many right customers your business will stay for a long-time, enabling you to place more solutions by the customers.

  • Select your customers wisely.
  • Understand how they create the value.
  • Develop them solutions they need(very different to what they want).
  • Set objectives and goals
  • Make individuals responsible
  • Communicate tirelessly
  • Monitor closely and often the progress made.
  • Focus on Customer Life-Time Value, the key to sustainable business growth!

Customer-Centricity is not a sprint race – it is a marathon run! Realize this!

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Customer-Centricity Customer-Centricit For long-term sustainable growth

Aug, 23 2021 in Business, Sales

Being Customer-Centric has always been close to my heart. Practicing it (better or worse) throughout my entire career taught me that this is not about emotional or cultural part of me but it is also about hard facts and numbers, which tell the language of my mind.

I can see that being Customer-Centric takes again its space in numerous new publications, training programs, and business consulting agencies’ offerings. That’s fabulous!

However, as it often happens with any great topic – it is important it is understood correctly (do you remember Balanced Scorecard? I have been presented many of them but believe me – only a few of them were truly balanced, whilst most of them were set of loosely connected KPIs), translated into the company-specific situation and thoroughly implemented.

Being Customer-Centric sounds a no-brainer and I guess we can’t find any CEO who would say her company is not at least striving to be truly customer-centric. But in reality, it is a very serious statement requiring long-term commitments and bold decisions…

But why to be Customer-Centric at all and what does this actually mean? Well, it depends:

  • Should we focus and act equally on fulfilling expectations of EVERY CUSTOMER?
  • Should we focus on EVERY STAGE of their buying process?
  • And by the way WHO IS THE CUSTOMER?
  • Etc?

We all have seen this, amplified especially during the pandemic, that the Customers are much more connected nowadays. They search for the best experience at every stage. They don’t care how complex our organizations are. Ignoring our traditional Go-to-Market strategies – THEY will find what they need regardless of touchpoints.

  • There is obvious  shift in control.
  • Customers (as all suppliers) become increasingly digital
  • They demand consistent experiences – seeing your business as a whole

So, how to become Customer-Centric? (I will come back to that in my other posts shortly).

I would advise we as suppliers shall really start from understanding THE CONSUMER and then have a thorough plan how to act on those insights!

Yes, you are right, without:

  • Setting clear responsibilities (yes – addressing incentive plans as well)
  • Setting and communicating short- and long-term goals
  • Measuring the progress

It will stay as one of the nice to have corporate statements no one will benefit from.

True Customer-Centricity means that your company will reach profitable, sustainable growth through understanding how the Customer creates value with our products or solutions. And this is a crucial difference to dominating model of being Product-Centric. Customer-centric growth means one shall understand and harness life-time value created not the transactional one!

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