The 5 Voices of Pricing
Pricing services or goods of your business is complex.
There are many variables to consider and sometimes there are competing priorities/views on this matter (that could influence your view on pricing).
Ideally, you will consider the following stakeholder’s perspectives before finalizing your pricing.
Typically you will form a view by identifying signals that inform you of your price range where you identify both your ceiling (maximum
price point) and your floor (your minimum price point).
The CFO’s Voice
The Accountant’s/CFO will tell you that in order to meet certain ROI targets, profit margins etc, the price must be X and volume must be Y.
The CFO view is typically focused on ROI and can be expressed as “at what price point must I sell at to make a decent return”
This view will guide you on the floor (lowest price range).
The Customer’s Voice
How much value can your customers derive from using your service.
Can your customers gain more value than what you want to charge them?
This creates somewhat a ceiling to what you can charge (or even gets you thinking how you can expand more life time value for my customers)
The Sales Reps Voice
Sales Reps will have a better understanding on what price point your customers are “willing to pay” which is another indicator on your
price ceiling. Usually they will have a price point that could “close the deal”
The Competitor’s Voice
Another useful benchmark to use for pricing your service is to compare against your competitors.
Your competitors may have slightly different value propositions (better or worse features than yours) so price accordingly.
The Strategist’s Voice
This view will take into the market size opportunity, the target market share with the price points and volumes available for your business to achieve in the medium to long term.
This point of view usually incorporates all the above i.e what price-point is required to achieve decent ROI, what value your service delivers to your customers, what your competitors are charging
and what price point will enable you to close the deal.
It might also be worthwhile to perform a survey to obtain as much intel as possible to help you inform your view on pricing for your business.
You want to cover questions that inform you about your prospects’ pain points, what is their definition of value and their views on price.
A good way to get a sense of the respondent’s price expectations (other than asking them to explicitly tell you what they are willing to pay) is to frame your question like this:
“How low does the price point need to go before you start questioning the quality of that service/product offered?”
This will hopefully extract the “floor” price point for you because that’s the price point where your customers will feel it is too good to be true (and believes it is an inferior proposition)
I mean if a Widget typically costs $1,000 (and your competitors also charge similar prices) then if someone tries to sell you a widget for $30, you have to question the quality of what they’re offering.
