Eight Steps to Testing a New Pricing Strategy
Eight Steps to Testing a New Pricing Strategy
2. Group your products/services into categories: Commodities, partially differentiated, substantially differentiated, custom. And remember that your opinion may be different than that of your target market - while you may view your products as "highly" differentiated, they may think "partially."
3. Evaluate your competition for each group of products. How do your prices compare to those of your competitors?
For many B2B companies, this step is easier said than done -- you're less likely to find specific pricing info for your competitors. If that's the case, you can try to "secret shop" your competitors, ask prospects for feedback or just estimate a range.
4. Talk to your sales reps. If they're very close to their prospects and customers, they may be able to provide solid estimates.
Give them a chart and ask them "If our price was X, how many incremental deals do you think you could have won (or lost)?" Provide 3-5 values for X.
5. Survey your lost prospects and customers. As in the previous step, you're trying to project the number of deals you could have won or lost at different price levels.
You can have your sales reps contact prospects and customers or you can use an independent third party or formal survey. Your goal is to find out whether they would have bought from you (or whether existing customers would buy more/less) at different price points.
6. Calculate your total estimated profit at each price point. First, calculate your total current profit at your existing price(s).
Units sold * (Price - Cost of Goods Sold) = Total current profit
Then look at your surveys and estimates and calculate the number of additional units you could sell (or lose) over the same time period.
(Existing units sold + incremental units sold) * (New price - Cost of Goods Sold) = Total projected profit
7. Test your theory. If possible, before you implement a company-wide pricing change, set up a statistically valid test to evaluate your new pricing.
8. Develop a communication plan. If you're raising prices, your sales reps and materials will need to easily overcome any objections they face. Consider giving existing prospects a window of time to buy at the current price. And if you are lowering prices, it's a great time to plan a major campaign to announce your news.
To learn how Interpersonal Development can assist with this or other marketing issues call John Brennan at 1-585-230-5765
Eight Steps to Testing a New Pricing Strategy - To learn more about this author, visit John Brennan's Website.
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1. Know your value proposition. If your pricing strategy and value proposition aren't aligned, you're contradicting yourself, confusing the market and limiting your opportunities.
2. Group your products/services into categories: Commodities, partially differentiated, substantially differentiated, custom. And remember that your opinion may be different than that of your target market - while you may view your products as "highly" differentiated, they may think "partially."
3. Evaluate your competition for each group of products. How do your prices compare to those of your competitors?
For many B2B companies, this step is easier said than done -- you're less likely to find specific pricing info for your competitors. If that's the case, you can try to "secret shop" your competitors, ask prospects for feedback or just estimate a range.
4. Talk to your sales reps. If they're very close to their prospects and customers, they may be able to provide solid estimates.
Give them a chart and ask them "If our price was X, how many incremental deals do you think you could have won (or lost)?" Provide 3-5 values for X.
5. Survey your lost prospects and customers. As in the previous step, you're trying to project the number of deals you could have won or lost at different price levels.
You can have your sales reps contact prospects and customers or you can use an independent third party or formal survey. Your goal is to find out whether they would have bought from you (or whether existing customers would buy more/less) at different price points.
6. Calculate your total estimated profit at each price point. First, calculate your total current profit at your existing price(s).
Units sold * (Price - Cost of Goods Sold) = Total current profit
Then look at your surveys and estimates and calculate the number of additional units you could sell (or lose) over the same time period.
(Existing units sold + incremental units sold) * (New price - Cost of Goods Sold) = Total projected profit
7. Test your theory. If possible, before you implement a company-wide pricing change, set up a statistically valid test to evaluate your new pricing.
8. Develop a communication plan. If you're raising prices, your sales reps and materials will need to easily overcome any objections they face. Consider giving existing prospects a window of time to buy at the current price. And if you are lowering prices, it's a great time to plan a major campaign to announce your news.
To learn how Interpersonal Development can assist with this or other marketing issues call John Brennan at 1-585-230-5765
Eight Steps to Testing a New Pricing Strategy - To learn more about this author, visit John Brennan's Website.
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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