If My Customers are Unique, Why Isn’t their Pricing?
Do you sell a product that is used differently by different customers? Maybe some features apply to one industry but not so much another. Perhaps your product is used daily by one customer and sparingly in other places. If you were nodding yes, you may have a case for implementing customer price segmentation.
Assigning a list price is an arduous task—we want to make sure we get it just right to ensure good margins and profitability. But are we underestimating the importance of one key question? Who is(are) my end user(s) and how are they using my product? If you can think of various answers you may have various customer segments. Not all products are created equally, and their value surely is not perceived equally by all consumers. The exact same good/service may have varying degrees of value based on how your customer is using it.
To start thinking about whether you have varying segments, think about your top few users, what exactly are they using this product for and what kind of value would they assign to this product? Is it a nice to have or is it essential? If your product is essential to running their business, a customer’s willingness to pay may be higher than the customer who sees the same product as something nice to have, but not imperative.
If you have determined that you may have diverse groups of users, try and determine what it is that makes these users different. Is it their industry? Their company sizes? The features of the product they use/don’t use? Is there a way to configure your offerings so that each segment is served, without having features they feel they pay for but don’t use? Enabling customers to select an offering that fits their needs without providing unwanted extras will allow them to perceive higher value from the price they pay.
Determining if various customer groups exist and then if executing a segmented pricing strategy is possible is a process that will involve collaboration with other teams such as marketing, legal, and sales. Don’t be afraid to try and sell the project. If you are willing and able to get the buy in, the efforts could lead to some very savvy pricing.
Tagged: customer segmentation, price segmentation, product management, product pricing