Did you know that the average company only spends less than ten hours per year developing its pricing strategy?
A lot of businesses aren't willing to put in the time and effort to determine the right valuations for their goods and services. Instead, they rely on other techniques, such as guessing, basing on competitors, and relying on discounts.
Fortunately, it’s never too late to optimize your prices!
By understanding what your customers are willing and able to pay and balancing that with value and profit, you can come up with a price that attracts buyers.
This can have a huge effect on your company’s growth and profitability!
In this article, our digital marketing experts in Miami will share with you price optimization tips to help you find the most effective price point that maximizes your product’s value to your customers.
Price optimization is the practice of making informed pricing decisions based on customer and market data.
It aims to determine the most effective price point for a good or service to help companies maximize their sales and increase profits. Pricing optimization has a similar process to dynamic pricing wherein a company regularly tweaks its price to match real-time demand.
To implement successful price optimization, you need to have the following information first:
The goal of price optimization is to develop a price point that both you and the customer can benefit from. To find that perfect balance of value, profit, and desire, start by optimizing these three things:
Your base price, or starting price, lets your customers know whether your product or service is something they can afford.
To optimize your base price, match it with the baseline demand for your products and services before applying any discounts or promos.
It’s helpful to optimize your base price, especially if you’re selling products and services that remain fixed over time (e.g., groceries, fast-food products, and other commodities).
Nowadays, it's becoming harder and harder to get new customers through content. Not to mention that the cost of acquiring one is rising substantially.
A customer that cost you $50 to win five years ago is costing you $100 to $120 today because of intense competition.
You need to find a way to hook people in and lower your cost of acquiring customers. This is where offering your products and services at a discount – or at a freemium version comes in.
By offering discounts, you can boost the sales of your seasonal and slow-moving products.
Promotional pricing is a sales strategy that aims to attract customers and prospects to buy by lowering prices for a short time.
This temporarily increases the value of your goods or service by creating a sense of urgency and scarcity. However, not all promotional offers provide the same results for every business.
Depending on your brand and who your target audience is, offering huge discounts may turn some customers off. You may be better off offering promotional bundles or freebies instead.
Optimizing your price requires thorough research, analytics, and metrics. Don’t take shortcuts or make any of the following mistakes:
Finding the best price point that works for you and your customers starts by having a deep understanding of who your best customers are.
Knowing who buys your goods repeatedly and what their perception of your products’ current and potential value will allow you to align their value perception with your price tag.
Segment your customer base according to their demographics, preferences, and psychographics. Then, create a customer persona and get to know your customers deeper.
You need to know how much each of them is willing to pay for your products and services, and what they value most in your offerings. This helps you find the right price point.
You also want to sort them into different types of buyers and ask them about their price sensitivity so you know how to present your price and sell your products or services to them.
There are many ways you can collect customer data. As your go-to digital marketing experts in Miami, we suggest conducting one-on-one interviews, running polls on your Instagram Stories, analyzing purchase history and sending out survey emails.
Price is just one aspect of your customers' buying decisions. Many consumers care more about a deal's total value than its actual price.
This is why you need to know your value metric. Value metric refers to a group of metrics that impact the price you charge for your goods and services.
By focusing on the benefits that your customers value the most in your offerings, or adding even more value to your products, you can set prices that will help you achieve business goals without driving customers away.
Here are things that your customers might find valuable that you want to emphasize in your copy and marketing materials:
As your trusted digital marketing experts in Miami, we know every customer wants something different.
Once you know what your target customers value in your products or services, don’t be afraid to experiment with ways to charge for the value they want.
What aspect of your products or services do your customers like best? What problems do these features solve? And, how are they able to solve your customers’ problems or satisfy their needs?
Consumers buy goods and services only when they know they will gain something valuable by acquiring them.
This means that you need to know what your customers are really after – something beyond the functionality, features, and price point that your products and services offer.
The first thing you need to do is to characterize how your products currently bring value to your customers. Then, ask yourself what you can do to create even more value.
Doing this allows you to develop customer-focused products and innovate on customer-relationship processes that help grow the value of your offerings and your company to your customers.
The more valuable your products or services are to them, the more you have the freedom to charge more and at the same time remain attractive to your target market.
Now for the fun part! Once you have all the data you need, it’s time to spot trends in the price points, benefits, product features, and value metrics that drive and lessen value.
Based on this, and how much different personas are willing to pay for your products or services, you can develop tiers and packages that your target audience will perceive as value for money.
Check out this example from Patagonia:
They offer customers the option to buy full-price items or shop for used gear for a lower price.
Price optimization is not a one-time thing. As your customers evolve and the demand for your products changes, you'll need to keep monitoring and adjusting your prices.
Never stop collecting data and making sure that your products and services still meet your customers’ needs and pricing expectations.
Keep an eye on how your customers respond to your starting, discounted, and promotional prices. Then adjust accordingly.
When you change your price, just make sure to communicate this with your customers to avoid shocking them and driving them away.
You can let them know about the changes in your price through your digital marketing Miami efforts or by reaching out to them directly via email.
Price optimization is a crucial part of running a successful business that thrives in the long term. By setting the right price for your goods and services, you can boost your sales and scale your business faster.
If you feel like your current prices aren’t helping you attract customers, maximize your sales, and increase profits, don’t hesitate to optimize them!
At Digital Resource, our team of digital marketing experts in Miami will work with you to help you determine the best price for your goods and services and market them to your customers effectively.
Contact us today to start getting more customers online!