Pricing is about so much more than revenue. It tells a complex story to potential customers. It talks to them about the perceived value of buying the product or service. It tells them who the business wants as its customers and who it does not. In short, it defines a business, opening and closing doors to specific markets.
It is therefore critical that significant thought be put into building out your pricing architecture. First and foremost, what story is it telling? Therefore, think of pricing as a storytelling tool. For example, Apple’s premium product pricing tells a very different story to the myriad of copycat phone brands.
Then ask yourself, What is it making possible? and Who is it excluding? This is basically a different way of asking Where are we playing? For example, an enterprise player could decide to exclude SMEs or to design their pricing in such a way that the more economic value that is created, the more that is shared (i.e., tiered pricing that increases as usage increases). Such decisions clearly depend on a host of factors like cost structures, competition and business strategy and yet the act of pricing effectively defines your ‘playground’.
That point of sharing value is also key. Every product or service creates a certain amount of monetary and non-monetary value. The question is how are we sharing that across the value chain?
That said, pain points do not always neatly align with price points. There are a ton of products and services I personally could use and benefit from, but they are priced in such a way that I cannot justify spending the money. I can see the value, but in a world of competing priorities they have not yet risen to the top of the list. The challenge for such companies is finding ways to profitably share more value with customers by offering lower tier or freemium options.
Questions in the Image:
- What is the goal of my pricing structure?
- What story does it tell customers?
- What does it make possible?
- Who does it exclude?
Want to Read More Around This Topic?
The Handbook on the Psychology of Pricing by Dr. Markus Husemann-Kopetzky (link to Amazon.co.uk). This book presents a collection of psychological pricing strategies and tactics. It introduces readers to insights into consumer psychology, subconscious persuasion and people’s perception of pricing.
Nurturing Curiosity – Daily Practice: This is part of the Nurturing Curiosity series of tools, insights and questions designed to help nurture curiosity as part of our daily practice. In point of fact, every interaction we have is an opportunity to question what we are observing and how we and others are seeing the world. Also remember that questions come in many forms throughout our day – upon hearing just now of a death in a friend’s family I was struck by how relative “important” and “urgent” are. Urgent is urgent until it isn’t, and it isn’t when something more important comes along like the death of a family member. And yet, do we really need to wait for such extreme events to offer ourselves the gift of perspective? How can we make it part of our daily practice?
About Tom O’Leary
My mission is to help others think differently – meaning more broadly and deeply – and thereby make better decisions. The key to thinking differently lies in our curiosity.
The more we question, the more possible answers we uncover, and the more we expand what we thought possible. Life has taught me that possibility lies not so much in seeking answers but in learning to ask better questions – the ones that help prioritise what is truly essential.
And yet, in a culture obsessed with efficiency and productivity, the paradox is that much energy and resources are wasted by a bias towards action over contemplation. If you are answering the wrong question, it doesn’t matter how ‘hard’ you work, you are still answering the wrong question.
That is why I am a big advocate of nurturing curiosity and innovative thinking at all ages, particularly amongst leaders because of the impact they have on us all. In my vision, leaders aren’t boxed in by traditional thinking or established playbooks. They are curious, open to fresh ideas and diverse perspectives, fostering a culture of exploration and learning.
How Might Tom Help?
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