One of the greatest opportunities and challenges in pricing is to capture the appropriate amount of value your company delivers to customers. This is accomplished by evaluating pricing potential for existing customers, new products, and repositioned offerings, as well as reevaluating and updating prices over time.
Determining opportunity for pricing requires an understanding of your position within the broader context of the market, and there are multiple tools that can be used in this process: economic value analysis, historical selling and win rate data, competitive pricing information, quantitative surveys, value interviews, etc. These methods provide the insights necessary to identifying accurate value, which enables successful outcomes across a wide variety of scenarios.
To keep it practical, we’ll walk through four case studies of companies that decided to revisit their pricing. Various courses of action were recommended based on each company’s offering and pricing opportunities, and upon execution, each was successful in driving incremental revenue and profit.
- Massive Increase – A tech-enabled services company operated for years on a very simple subscription model at a low price point. The company then repositioned itself at over 10x its current price. The market accepted this shift because the new proposition was more in line with the value that buyers and users already received from the vendor.
- Significant Increase – The market leader of a niche technology category had been making minor price increases periodically, but they were worth far more to users than they realized. After a thorough value analysis, a differentiated customer price increase effort saw prices rise 40% across the product lines. Minimal churn resulted, whereby revenue and profit grew by nearly 40%.
- Moderate Increase – A company had a hypothesis that their pricing was low for the value they delivered, but they didn’t know much about where their competitors were priced or how their product and service combinations compared to the market and buyer needs. According to competitive analysis, sales team and external interviews, willingness to pay study, and a value analysis, there was a window where prices could increase, but outside of a 20% range there would be a material risk to the business. The company increased by around 15%, increased their valuation significantly over most of a year, and then transacted on the gains.
- Decrease – A company with several years of operating experience had been successful in small and mid-market accounts, but they couldn’t win in the enterprise space when they attempted charging enterprise prices. The markets below the enterprise level were very competitive and presented some opportunities to increase prices and improve packaging, but a value analysis indicated their offering positioned for the enterprise space had unacceptable gaps in capability compared to incumbents. In this case, the specific gaps became roadmap items, and prices were reduced to a level that finally got some wins in the lower end of the enterprise market, with potential to reposition once the gaps were addressed.
For each one of our clients, understanding the unique value drivers within their individual markets led to actionable, sustainable revenue growth. When considering a pricing move for your business, having the right strategy based on solid insights makes all the difference in finding success.
Reach out to the Maple Street team to discuss your pricing situation.
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